Britons Face £2.05Bn Christmas Sales Credit Card Hangover

[athom]

Britons face £2.05bn Christmas sales credit card hangover

Shoppers will owe £150m on plastic by February purely as a result of spending in this week's sales, the Sunday Telegraph can reveal. That comes on top of the £1.9bn racked up before Christmas on presents and food and drink, and follows figures that suggest insolvencies are at record levels. It is feared some of the debt is caused by pressure to 'beat' the increase in VAT on January 4. "This year, more than any other, we would appeal to people not to get carried away and to use credit carefully indeed," said a spokeswoman for the Consumer Credit Counselling Service. "With rising prices and the threat of one million more redundancies, budgeting for 2011 is going to be difficult for most people in Britain. "To think you are on top of your finances by paying off the minimum each month is a fool's paradise," she added.

Research published today by consumer website Kelkoo reveals one in three shoppers are buying items earlier than planned in order to avoid the higher rate of VAT. However, it also found a similar number would pay for these purchases using credit cards or stores cards, many of which have interest rates that will wipe out any VAT savings unless consumers pay their balances off in full. According to the UK Payments Administration, 12 per cent of credit card holders pay only the minimum amount every month. The £2.05bn credit card burden was calculated by personal finance website Money.co.uk based on its previous pre-Christmas debt estimate of £1.9bn and a prediction by the Centre for Retail Research of a total post-Christmas retail splurge of £3.8bn. Chris Morling, managing director of Money.co.uk said: "With VAT set to rise it is easy to understand why so many seem set to spend big in the post-Christmas sales. "But the average interest rate on credit cards stands at just over 18 per cent so those debts can quickly mount up and wipe out any savings made." More than half the population is in already in debt, according to latest Bank of England figures that show consumers owe £58bn on credit cards and a further £157bn on unsecured loans and overdrafts. Chris Simpson, marketing director of Kelkoo, said: "Retailers have spent the last few months encouraging consumers to 'shop now to avoid the VAT increase' which more than third seem to have taken on board. "However, the combination of lower disposable incomes, higher prices, and a reluctance to increase borrowing is likely to result in lower levels of spending, meaning retailers may have to endure a £2.2 billion fall in retail sales in the first quarter of 2011."

Wasn't spending supposed to save the economy? Or does that only apply if we spend money we actually have?

Maybe the BoE can reel in the maniac level of debt people are still racking up by raising interest rates .25% rather than just threatening it, just to get the headlines and scare people into inaction.

[winkie]

How can you be saving VAT if you are buying stuff on credit...instead of giving money to the government you must be giving money to the credit card companies.

[aa3]

At this point to get things moving is going to take a lot more than £2 billion. The government is borrowing and spending £175 billion a year extra. And we still seem to be losing jobs.

Even the entire "£58bn on credit cards and a further £157bn on unsecured loans" is looking like hardly anything. Thats just over one year's deficit.

If they really wanted to spike the punch bowl, they should have given every citizen, including children a national credit card and thrown £1,000 on it- and made it so the money disappears on New Year's Eve 12pm if its not spent. Cost £62 billion.

Edited December 26, 2010 by aa3

[The Ayatollah Buggeri]

If they really wanted to spike the punch bowl, they should have given every citizen, including children a national credit card and thrown £1,000 on it- and made it so the money disappears on New Year's Eve 12pm if its not spent. Cost £62 billion.

Which would have the effect of making the owners of Chinese sweat shop factories £62 billion richer.

[Bloo Loo]

At this point to get things moving is going to take a lot more than £2 billion. The government is borrowing and spending £175 billion a year extra. And we still seem to be losing jobs.

Even the entire "£58bn on credit cards and a further £157bn on unsecured loans" is looking like hardly anything. Thats just over one year's deficit.

If they really wanted to spike the punch bowl, they should have given every citizen, including children a national credit card and thrown £1,000 on it- and made it so the money disappears on New Year's Eve 12pm if its not spent. Cost £62 billion.

and then?

[DeepLurker]

and then?

+1

aa3's suggestion is just rearranging the deckchairs.

[winkie]

There is another way to beat the VAT rise and thats not buy XYZ in the first place then people wont be lining the pockets of grossly overpaid CEO's, paying lots of money in Tax to Govt and you dont get yourself into even more debt. So many problems solved.

You won't miss something you have never had.....but you will pay extra for something you can't pay for.

[Guest spp]

Print...Spend...Print...Spend - repeat!

What could go wrong? The end of boom and bust!

[Bloo Loo]

You won't miss something you have never had.....but you will pay extra for something you can't pay for.

plus, you pay for what you didnt have before January, you certainly aint gonna buy it in 2011.

Whats the position of VAT on Holidays?...is it the date you order it, or the date you go on it.... the latter I would think as the tax point would be the date of leaving.

[Realistbear]

http://uk.finance.yahoo.com/news/Boxing-Day-sales-online-tele-4107259038.html?x=0

Boxing Day sales:

online shopping hits record high

Tim Ross Social Affairs Editor, 17:25, Sunday 26 December 2010

Record (LSE: REC.L - news) numbers of people took time away from family celebrations on Christmas Day this year to trawl shopping websites for bargains, leading to predictions of the busiest online sales season ever.

Analysts said consumers were taking a strategic approach to the annual sales, searching the internet for the opening times of high street stores and major shopping centres, as they planned their quest for the best discounts.

Almost 5 million people bought products online, spending an estimated £153 million, after stores including Tesco (LSE: TSCO.L - news) , Marks & Spencer (Dusseldorf: MA6.DU - news) and John Lewis began their winter sales early via their websites.

Not sure how this binge will save the economy given that 80%, possibly more, of the stuff bought would have been made in ASIA. Online shops do not hire many people and add little to the economy but a lot to the negative tradebalance.

No signs of a recession yet with spending picking up.

[winkie]

plus, you pay for what you didnt have before January, you certainly aint gonna buy it in 2011.

Whats the position of VAT on Holidays?...is it the date you order it, or the date you go on it.... the latter I would think as the tax point would be the date of leaving.

...another question VAT on gas/electric bills is at the moment 5%.....what will it be next year? 20%!!!!!!....

[porca misèria]

Which would have the effect of making the owners of Chinese sweat shop factories £62 billion richer.

Not really. It would have the effect of devaluing the £ again. And of course pushing up asset prices in £, as we struggled to find a store of value for it in the face of such destructive folly.

[porca misèria]

Shoppers will owe £150m on plastic by February purely as a result of spending in this week's sales, the Sunday Telegraph can reveal.

Shock horror!

But that's less than a fiver per adult. I'll spend enough for several of us on a meal out this Thursday. And having given away festive spirit to more people than I'd anticipated, I have to buy another couple of bottles during the week.

All in all, I've run out of fingers to count the number of people's share of £150m I'll be spending on a credit card. Good thing it's paid in full by direct debit every month.

Smells of non-story to me.

[aa3]

and then?

I believe we are entering a new paradigm.. where printing and spending is later followed by more printing and spending. And it is viable longer than you might think. Just like the credit bubble that arguably started in the early 80's.. went a lot longer than most people thought. Yet it was a bubble, but it went for 25 years before it blew up.

As long as in the background technology and productivity keep rising, things will get more and more bizarre.

[The Ayatollah Buggeri]

plus, you pay for what you didnt have before January, you certainly aint gonna buy it in 2011.

Whats the position of VAT on Holidays?...is it the date you order it, or the date you go on it.... the latter I would think as the tax point would be the date of leaving.

The date you pay for it would be my guess.

In any case, this is effectively a non-issue as far as UK PLC is concerned. Public transport ('Passenger transport in a vehicle, boat or aircraft that carries not less than ten passengers') is VAT-exempt, and any sales tax on hotel accommodation will be paid to a foreign government. There might be a few quid of VAT on the tour operator's commission, but that'll be it. I can't see how the forthcoming increase will have any significant effect on the cost of package holidays. The real tax issue there is with air passenger duty.

Edited December 26, 2010 by The Ayatollah Buggeri

[porca misèria]

As long as in the background technology and productivity keep rising, things will get more and more bizarre.

That's exactly what's changing just about now.

The past 40 years have seen hugely favourable demographics: a population bulge in their productive years, women moving from the fringes to the heart of the workforce, and immigrants from poorer countries propping up the workforce. The future sees the population bulge drawing pensions, women already full participants in the workforce, and shrinking potential to exploit immigrants as their home countries narrow the gap with us.

[aa3]

That's exactly what's changing just about now.

The past 40 years have seen hugely favourable demographics: a population bulge in their productive years, women moving from the fringes to the heart of the workforce, and immigrants from poorer countries propping up the workforce. The future sees the population bulge drawing pensions, women already full participants in the workforce, and shrinking potential to exploit immigrants as their home countries narrow the gap with us.

Those factors have helped create the asset price increases we have seen in the last few decades. Otoh such a bulge in the workforce arguably depressed wages. Definately the wages to asset price ratio is way out of balance.

But something to consider is we don't need all these workers.. as evidenced by the huge and growing unemployment.

[ken_ichikawa]

Shock horror!

But that's less than a fiver per adult.

Thats IF it is divided equally though which it isn't.

For example me and my immediate family spent £0, in fact we were all out working making money, since we don't celebrate christmas. Many of my peers and friends are also in the same boat. Therefore it's not as simple as just dividing it into the whole population.

Unless you mean bailing them out that is, whereby I as a non combatant to this debt situation am forced to pay for the mistakes of others. With easy escapes like bankruptcy (which IMO should be outlawed)

[Bloo Loo]

The date you pay for it would be my guess.

In any case, this is effectively a non-issue as far as UK PLC is concerned. Public transport ('Passenger transport in a vehicle, boat or aircraft that carries not less than ten passengers') is VAT-exempt, and any sales tax on hotel accommodation will be paid to a foreign government. There might be a few quid of VAT on the tour operator's commission, but that'll be it. I can't see how the forthcoming increase will have any significant effect on the cost of package holidays. The real tax issue there is with air passenger duty.

brilliant!...learning something new on Boxing Day...

[Rare Bear]

The date you pay for it would be my guess.

In any case, this is effectively a non-issue as far as UK PLC is concerned. Public transport ('Passenger transport in a vehicle, boat or aircraft that carries not less than ten passengers') is VAT-exempt, and any sales tax on hotel accommodation will be paid to a foreign government. There might be a few quid of VAT on the tour operator's commission, but that'll be it. I can't see how the forthcoming increase will have any significant effect on the cost of package holidays. The real tax issue there is with air passenger duty.

Yes, the air passenger duty is a real stealth tax. If there were VAT charged on an air ticket a business buying the ticket would offset the VAT but the air passenger duty is just gone.

[porca misèria]

Shock horror!

But that's less than a fiver per adult. I'll spend enough for several of us on a meal out this Thursday. And having given away festive spirit to more people than I'd anticipated, I have to buy another couple of bottles during the week.

Well, that's what I thought. And there's still time.

But today I'm deeply shocked: all the shops I wanted to go to were closed! From the greengrocer, to the market and all the small shops surrounding it, through to the luxury shop where I'd expected to buy a couple of bottles a little more interesting than our supermarkets have.

And with the greengrocers closed, even somerfields had big gaps in its fruit&veg shelves. Had to change my culinary plans! :angry:

Whatever happened to the spirit of retailmas?