Christmas sales debt warning

By Graeme Paton

Experts warned of an increase in the use of high-interest credit cards as bargain hunters shed the inhibitions of the economic downturn to dramatically blow their festive budget.

Last night, debt advice organisations were braced for a significant upsurge in calls, with average customers taking as long as six-months to pay off Christmas bills.

The disclosure came as new figures suggested shoppers will cut almost £1 billion from spending on non-essential goods next year as the austerity drive continues to bite.

Data from the retail research firm Verdict suggests that electricals, furniture, floor coverings, DIY and gardening goods will be hardest hit, with sales unlikely to improve until mid-2013.

 It comes despite an intense scramble for bargains in shops and on-line over the last few days.

 Some £2.5bn is believed to have passed through the tills on Tuesday on top of an estimated £1.8bn on Boxing Day – believed to be the highest post-Christmas spending on record.

 Experian Hitwise UK, the web analysts, said sales were fuelled by a record number of online shoppers. Retail websites such as Argos, Next, John Lewis and M&S received a total of 96m UK visitors on Boxing Day alone, it was revealed, up by almost a fifth on the same time last year.

 But uSwitch.com, the price comparison site, warned that the Christmas sales bonanza may lead to an increase in personal debt.

 Michael Ossei, personal finance expert, said: “A lot of people are quite savvy through the whole Christmas period and really hold off. But we also see that there are many others who lose their inhibitions and start spending more than they can actually afford.

 “The sales are particularly attractive to the less savvy opportunists. They will walk down the high street with their credit card and as soon as they see something branded ‘75 per cent off’ they are going to buy it. They don’t need it, but they buy it. That’s where the whole thing spirals out of control.

 “By all means, go out there and enjoy the sales, but our advice would be to look at what you are buying and properly consider how you are going to pay for it.”

 The comments come after research by uSwitch last week that showed more than a quarter of people will be in debt as a result of Christmas spending this year, with many being plunged into the red by more than £300.

 Some four-in-10 people surveyed said they would use credit to pay for presents, with adults taking an average of six months to pay off debts.

 The figures emerged as a separate report from researchers Verdict warned of a decline in the amount of money spent on non-essential goods in 2012.

 Sales of groceries will grow by 3.3 per cent as consumers eat more meals at home to save money, the firm said.

 But spending on non-food items is set to shrink by about 0.5 per cent as the change in attitudes "from extravagant to austere" continues, it was claimed.

 It will add to fears that major retailers are in danger of collapsing amid unprecedented levels of price reductions.

 Among the most vulnerable are lingerie chain La Senza, Blacks Leisure and Millets.

 Maureen Hinton, Verdict retail analyst, said: "Conditions will ease slightly with events such as Easter, the Diamond Jubilee and the Olympics improving consumer sentiment, but overall confidence will still be low.

 "Real improvement and growth are only likely from October onwards when, as long as the weather is seasonably cold, consumer will be driven to buy seasonal essentials before the end of the winter retail season in December and get back into the Christmas spirit."