Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Tesco's decision to mail out £67 million worth of Clubcard vouchers nearly 10 weeks in advance is the latest sign that big retailers are doing all they can to boost consumer spending power for Christmas.
As the festive spending spree gathers steam, dark clouds hang over the economy. Few of us are likely to feel better off in 2010 than 2009, as job cuts hit the public sector and fears surround the global financial system.
"The public-sector deficit will become the dominant influence on the economy, bringing combined downside risks of further tax rises and cuts in Government expenditure," warns Jonathan Jackson, head of equities at brokers Killik & Co.
"Tax rises on consumers will cut disposable income, VAT increases will put upward pressure on prices while public-sector cuts put downward pressure on employment."
Against that background, most of us must spend carefully this Christmas. A YouGov survey for Foresters Friendly Society found that only 28% of adults think the worst of the financial crisis is behind us, with fears of worse to come strongest among over-55s.
To start 2010 in the black, consider some of these tips and warnings from experts:
:: Relying on credit cards can easily add 10% to Christmas shopping bills if you don't clear your bill each month, says Andrew Hagger at Moneynet.co.uk.
Some cards still offer a 0% rate for an introductory period (10-12 months), including Tesco Bank Clubcard MasterCard, Sainsbury's Finance MasterCard and M&S Money MasterCard - but many applicants won't qualify for these.
In comparison, a £300 loan from Provident Personal Credit repayable over a year costs a stonking £246 in interest.
:: But for purchases over £100, use a credit card as valuable extra protection - Section 75 of the Consumer Credit Act means you are covered if goods are faulty or don't turn up.
:: Use store cards with great care - as Moneysupermarket.com points out, many charge higher rates on outstanding balances than regular credit cards.
However, Moneynet notes that you get good discounts on the day you take it out, so you still win if you repay the statement in full.
:: A cashback credit card gives you some benefit from money spent on gifts for others.
However, rewards cards are getting harder to find. Sainsbury's Finance says only 13 of 224 credit cards available in the UK still offer cash back on spending (against 43 in autumn 2005). Sainsbury's own card offers the equivalent of a 2% cashback on Sainsbury's purchases, in Nectar points redeemed in-store or with Nectar.
The market-leading American Express Platinum Cashback credit card offers new applicants cashback at 5% for the first three months (up to £100), and thereafter a cashback at tiered rates. Spending £10,000 a year gets a £125 cashback.
American Express: 0870 606 6906 and www.americanexpress.co.uk.
:: Steer clear of payday loans, which offer cash to tide you over until your wages come through.
Moneywise magazine says payday loan providers may charge up to £30 for every £100 borrowed over 31 days, which works out as an APR of 2,255%.
:: Use the internet for Christmas shopping. A survey from online gift and gadget shop www.prezzybox.com says 58% of shoppers intend to order gifts online, and the website offers a discount code of £3.25 for anything purchased on the site, because that's the average cost of parking each time we visit the High Street.
Mark Pearson, managing director of MyVoucherCodes.co.uk, is expecting annual sales to exceed £500 million and reckons customers will save £52m in 2009, against £28m in 2008.
Although Debenhams, Asda and Tesco have all announced plans to slash prices of hundreds of items, VoucherCodes.com managing director James Carter predicts that online discounting is going to "kick off in a big way".
"Retailers like Oasis and Dorothy Perkins revealed voucher codes for 20-25% off normal retail prices in early November, but we don't think it will end there," he says.
"Savvy shoppers should track retail offers each day as I'm positive that 30%, 40% and 50% discounts will become the norm."
The new Argos financial services price comparison website (www.argoscompare.co.uk) offers £30 of Argos vouchers with every car insurance purchase, and £15 vouchers on every home insurance policy.
Overall, says Moneysupermarket.com, some 46% of adults intend to download discount vouchers to cut the cost of Christmas shopping, and of eating and drinking out.
Which? says shoppers must know their online rights - purchases made online, by post or phone enjoy a 'cooling off' period which begins the moment the order is confirmed and ends seven working days from the day you receive the goods, in which time you are free to cancel.
:: Join 25% of shoppers bidding for gifts online this year, against 22% in 2008, says a survey by insurer LV=. Popular sites to place bids include eBid (www.ebid.net), Gumtree (www.gumtree.com) and Totalbids (www.totalbids.co.uk) which charges no fees for buying, selling or listing.
"We realise more people bid for expensive designer goods online because we receive claims when they turn out to be fakes. These are not covered by our policies," says LV= spokeswoman Emma Holyer.
:: Shop around for the most affordable personal loan, because if your credit rating is acceptable, it's much cheaper than using a credit card.
"Personal loans set out a schedule of monthly repayments to clear a debt by a specific date," says, Moneyfacts.co.uk financial researcher Ricky Bruce.
"With credit cards, it is all too easy to file statements in the drawer, and thus to take longer in paying money back, which is also more expensive."
Lenders are clamping down: M&S Money only considers over-30s who own their own home.
But typical £5,000 loans over three years start at 8.8% for holders of Sainsbury's Nectar card, while Alliance & Leicester, Tesco and others hover around 8.8%, some with a holiday of a month or two before repayments begin.
:: If you get paid early for Christmas, put £200-300 into a separate savings account to tide you over in late January when there may be a five or six-week gap before the next pay cheque, advises Moneynet.co.uk.
:: Set a budget and stick to it: shops set their wares out so persuasively, it is all too easy to overspend. Decide a limit for each gift to avoid debts running through 2010.
:: For useful gift ideas, try frugalcrew.com, launched last month to highlight best deals and unique buys.
It's the brainchild of Lynn McClelland, who spent nine years at British Airways before going to business school in 2003, and Jen Mowat, start-up MD for eBay in the UK in 1998.
It is funded by click-through links and commission on spending on sites visited via frugalcrew.com.
:: Don't forget loyalty card schemes run by high-street shops, advises Which?, which notes Nectar and HMV reward cards can both be used for online purchases.
Nectar points are offered by various online shops (go to www.nectar.com to click the 'shop & collect online' tab).
:: Consider switching suppliers for gas and electricity. Which? recommends its switching website (www.whichswitch.co.uk) to find the best deal and enjoy savings running into three, possibly four figures.
There are invariably savings made by accepting bills online, and paying by direct debit.
Figures from uSwitch.com says the average home heating bill of £520 a year shrinks to £409 online, of which hot water falls from £235 to £185 and lighting drops from £99 to £78.
16. If you do decide to go shopping, try to walk: uSwitch.com reckons consumers spend £8 million driving to the shops for Christmas gifts, and £70m on car-parking charges.
If they all went online, says the website, they could save £78m in travel and parking costs.
:: In the Christmas spirit, take out a charity card or open a savings account to benefit a good cause.
Moneysupermarket.com says a market-leading charity card from the British Heart Foundation offers a £50 donation when the card is taken out, followed by 35p donated per £100 spent thereafter.
Someone spending £150 per month on this card nets the charity £56.30 a year, says the website.
Annie Shaw at financial help website CashQuestions.com likes The Demelza Card as a prepaid MasterCard, which is free and costs 50p each time you use it. All profits from the card go to the Demelza Hospice Care for Children charity in Kent.
:: Go shopping with an agreeable friend or relative and you might be able to save from the purchase of BOGOF (Buy One, Get One Free) items, suggests Moneynet.
Overall, says Abbey, Britons will spend £3.45 billion of their savings to help cover Christmas shopping - with a third planning to use 9% of this year's savings, an average £221 each.
Poundnotes
:: Although Britons think they could last 10 months if they lost their jobs and didn't find another, the reality is they could survive for barely five months - and 38% of the working population could not get beyond one month on savings alone, says the Reality Gap Resort commissioned by protection specialists Bright Grey. The average redundancy payout of £10,000 covers a family's outgoings for just five months.
:: The new range of fixed-rate bonds from Santander - which includes Abbey, Alliance & Leicester and Bradford & Bingley - pays up to 3% on the one-year term and 4% gross on balances over £10,000 on the two-year deal.
Abbey's one-year fixed-rate monthly saver also pays 4% gross, for regular savers putting aside £20-250 per month.
:: Small investors tired of earning little on cash deposits can take their pick of lots of tasty dividends from major companies on the London Stock Exchange, says broker Killik & Co. It has built a portfolio including AstraZeneca (prospective yield 5%), BP (6.2%), Cable & Wireless (6.7%), Man Group (8.6%), Royal Dutch Shell (6.1%) and Vodafone (5.9%). National Grid (5.8%) will grow its payout by 8% per annum until 2012.
However, Killik admits: "A high dividend yield is not always indicative of an attractive valuation. It can sometimes be a sign of an impending dividend cut."
:: The average child will get presents worth £380 this Christmas, against £316 in 2008, says The Children's Mutual.
But chief executive David White says that if £200 of this money went into a Child Trust Fund (CTF) each year, it could be worth £6,100 by a child's 18th birthday.
Children's Mutual: 0845 077 1899 and www.thechildrensmutual.co.uk/topup.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
State Bank of India 0207 454 4315 5.25% (F) Five Year Bond £10,000 Yly
Halifax www.halifax.co.uk 5.15% (F) Web Saver Five Years £500 Yly
Investec Bank 0845 366 6333 3.36% High 5 Three Month (P) £25,000 Yly
Manchester BS 0161 923 8015 3.31% Premier Notice 5 35 Days £1,000 Yly
West Bromwich BS via branch 3.30% Branch Bonus 2 Instant £100 Yly
:: Top-five borrowers:
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 2.49% discounted for two years 60% £999 Yes
First Direct (Rem) 0845 610 0100 2.99% variable for term 60% none Yes
ING Direct (UK) 0845 603 8888 3.09% for term 75% £695 Yes
Co-operative Bank 0800 633 5286 3.24% to 31/01/13 75% £995 Yes
The One Account 0845 610 1060 3.75% for term 75% none Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
