Surprise, surprise... it is that time of the year again. The Christmas countdown has begun in earnest.
Christmas comes but once a year - but it does come round every year. So why is it, according to the Post Office, that four million Britons fail to plan for Christmas spending and a third of those that do, go over budget?
It is only natural to want to splash out, but not if it leaves you starting the New Year with a nasty debt hangover.
You may not have given much thought to your Christmas spending this year.
But be assured that the credit card industry has devoted plenty of time to thinking about it. Expect the results of their deliberations to land on a doormat near you any day now.
This time of year is especially busy for the credit card companies, as they send out an estimated 100 million unsolicited mail-shots - that adds up to an average of almost under two mail-shots per person in the country.
Many of us will be inundated, receiving anything between five and 10 such 'special' offers.
Special? Maybe, but they are unlikely to be the best. One survey of credit card mailings suggests that the charges quoted on postal offers are two percentage points higher than the market average.
Research by the Direct Mail Information Service suggests that however uncompetitive these mail-shots may be, more than two-thirds of the people who receive them are encouraged to take out a new card.
That temptation is what makes the credit card companies ever more aggressive in their attempts to achieve market share.
What is behind the postal feeding frenzy by the card providers? The internet, oddly enough.
Last year we spent a total of £16 billion online: that is a third more than the previous year.
And you can expect the figure to be even higher this year. Internet sales are expected to hit £5 billion this Christmas alone.
The high street may be suffering, but online spending is expected to jump.
While this may be good news for those of us finding a cut-price online bargain, it is great news for the credit card providers because their income also benefits.
Most card companies earn a higher merchant service fee through online purchases than they do through the shop tills.
By all means spend money on your credit card this Christmas - but do it sensibly.
Make sure you have the right credit card with an interest rate deal that suits you, not your credit card provider.
Do not fall for the siren call of the mail-shot on your doormat. If you want a new credit card, it makes more sense to compare what is available across the market.
What should you do with those postal offers? If you have an open fireplace, they make handy firelighters. If not, bin them, but remember to shred them first.
Xmas credit card warning
December 8, 2005, 12:06 amYour Spending Is Being Watched
December 4, 2005, 11:02 pm
Every now and then, someone turns up on our Dealing with Debt discussion board to blame the banks for letting them get into a financial mess. Irresponsible lending, they call it. I call it irresponsible spending. But maybe we're both right.
There's no doubt that some people just aren't very good at managing their money and it can't help when credit is so easy to obtain. But then lenders don't really have that much to go on when they're deciding whether to let you have a new credit card or loan. Your credit files may look clean as a whistle because you're making your repayments on time but they don't tell a lender whether you're overspending.
The banking industry has shared information about customers who have fallen behind with their payments since the late 1980s. More recently, many lenders have been sharing further information about outstanding balances and credit limits. And now they're set to open up even more.
Four of the UK's biggest credit card lenders - Barclaycard, the Co-operative Bank, Egg and Abbey - have just announced plans to share 'behavioural' information on credit cards in the hopes that it could help to identify customers getting into financial difficulty. This will include:
* How much is being spent on the card each month
* How much is being repaid each month
* How much cash has been taken out
* Any recent increases or changes to credit limits
* Any cheques sent for payment which bounce
* How many people can use the card
In theory, lenders should be able to get a better idea of a person's spending habits rather than just their borrowing practices and will, therefore, be able to make better decisions.
This could, of course, mean that it may be tougher in future for people to get further credit but to my mind, that's no bad thing. It could also make credit more expensive for people who appear to be overstretching themselves but that's no bad thing either. The more it costs to borrow, the more likely it is that people will think twice about it.
There's no doubt that some people just aren't very good at managing their money and it can't help when credit is so easy to obtain. But then lenders don't really have that much to go on when they're deciding whether to let you have a new credit card or loan. Your credit files may look clean as a whistle because you're making your repayments on time but they don't tell a lender whether you're overspending.
The banking industry has shared information about customers who have fallen behind with their payments since the late 1980s. More recently, many lenders have been sharing further information about outstanding balances and credit limits. And now they're set to open up even more.
Four of the UK's biggest credit card lenders - Barclaycard, the Co-operative Bank, Egg and Abbey - have just announced plans to share 'behavioural' information on credit cards in the hopes that it could help to identify customers getting into financial difficulty. This will include:
* How much is being spent on the card each month
* How much is being repaid each month
* How much cash has been taken out
* Any recent increases or changes to credit limits
* Any cheques sent for payment which bounce
* How many people can use the card
In theory, lenders should be able to get a better idea of a person's spending habits rather than just their borrowing practices and will, therefore, be able to make better decisions.
This could, of course, mean that it may be tougher in future for people to get further credit but to my mind, that's no bad thing. It could also make credit more expensive for people who appear to be overstretching themselves but that's no bad thing either. The more it costs to borrow, the more likely it is that people will think twice about it.
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