Catalogue customers warned to avoid debt spiral
With household incomes stretched to breaking point many consumers are turning to catalogues to spread the cost of goods such as clothes and furniture, but this could lead to a spiral of debt, a debt charity warns.
The Money Advice Trust is receiving around 100 calls a day about catalogue debts, more than it receives about worries over mortgage repayments, rent or payday loans.
The problem with catalogue purchases is that customers enter a credit agreement which requires them to pay high interest rates.
Companies may offer an interest free period on purchases but this can become void if the customer fails to make a payment on time.
Confusion can arise over payment dates, as some companies require a payment to be made every 28 days, rather than once each calendar month, and this can easily cause a payment to be missed by mistake.
The interest charged by catalogue companies is often higher than the interest on credit cards or personal loans and can be as much as 40 per cent.
Joanna Elson, chief executive of the Money Advice Trust, said; ‘More people are turning to catalogues to replace broken appliances, buy clothes for growing children, or just to manage a tight monthly budget.
‘This means more people entering credit agreements at a time when money is scarce — which inevitably leads to more debt problems.’
James Falla, personal debt expert at BeatMyDebt.com warned people on low incomes to avoid using catalogues because it is so easy to
slip into a “spiral of debt”.
Meanwhile, Stephen Archer, a director of Spring Partnerships, has warned that consumers are building up high levels of debt on their credit cards.
The average annual income is £26,000 but many credit card offer a £5,000 credit limit, which is a ‘frightening combination’ Mr Archer said.
He suggests that making purchases with a credit card gives people an illusion that they are better off than they really are.
The problem is causing the country to live beyond its means, both at a personal and state level, he warned.