Avoid the Christmas card spending trap

With one weekend left before Christmas, store cards offering discounts and special offers can seem an attractive way to purchase last minute presents, but Alliance & Leicester is warning of the repercussions of using store cards for your festive shopping, which could leave you £1500 out of pocket.

Research from Alliance & Leicester Personal Loans has revealed that a staggering 23% of people have used store cards to help pay towards their Christmas spending. Of these over half use store cards simply because they were offered them at the point of purchase. This is despite some eye-watering interest rates which can easily make the effects of those festive purchases last much longer than the Christmas hangover.

Despite an OFT investigation into storecard rates, the issuers remain undeterred. With most store card issuers refusing to reduce these wallet-busting rates (some reach almost 30% APR), a consumer with total debts of £7,500 could save £1500 in interest payments by consolidating these to a low-rate loan, such as Alliance & Leicester’s with a typical APR of 5.9% over three years.

The good news is that one quarter (23%) of consumers with some kind of debt would consider consolidating their debts into one loan at a much cheaper rate.

Almost one in three (31%) of those intending to consolidate their debts said they recognised that moving all debts to one loan can reduce the amount they pay each month, and a further 9% believe this is the best way to try and clear their debts next year. However five per cent of people remain unconvinced of the benefits of debt consolidation, and believe it can offer a ‘bad deal’ for the consumer.

The research also found that among those planning to consolidate debts:

One in five people have a New Year goal to pay off their debts in 2007

16% need the discipline of set monthly repayments that a loan offers, in order to pay more than just the interest off on their debts

10% are fed up with having credit and store card debts that they are not paying off

Richard Al-Dabbagh, Senior Personal Loans Manager at Alliance & Leicester, commented: “Christmas costs can really add up, and some of the offers pushed at us by sales assistants in connection with their store cards can seem really tempting. The real costs of these ‘discounts’, however, may be with you for a long time as interest payments stack up.”

Consolidating existing debts to one low-rate personal loan offers consumers the benefits of discipline with their finances in the form of fixed monthly repayments, a definite end date for their debt, and a fixed rate of interest for the term of their loan.

Richard Al-Dabbagh concluded: “A low cost personal loan could make borrowing more manageable – or at least make the start of the New Year less of a headache – and it is likely to save you money in the long run.”

For consumers considering applying for a loan or switching provider, Alliance & Leicester's website, alliance-leicester.co.uk, provides access to useful tools to help guide them through their financial choices.

The site contains a Loan Calculator which lets people work out how much they can afford to borrow and decide how long they wish to spread their repayments for.

Alliance & Leicester personal loan customers can benefit from the following:

An unsecured personal loan from as little as £1,000 to as much as £20,000
A low typical APR of 5.9% for loans of £7,500 - £20,000 for telephone and Internet applications, and in branch for Premier current account customers
Repayment over one to five years
Fixed monthly repayments for the period of the loan
Quick and easy application, online, via the phone or in branch
No arrangement fees
Optional loan protection for added peace of mind