Two thirds use retail credit to pay for Christmas

Two-thirds of consumers have used or plan to use retail credit during the Christmas season according to research by Moneyhub.

The report has revealed that retail credit users spend an average of £1,012.55 over the holidays, with £759.71 with nearly three-quarters financed through retail credit.

The data showed that 64% of people are struggling to repay it, suggesting that many enter the New Year burdened by new debt. Furthermore, nearly a third (28%) of credit-using consumers have fallen into collections or arrears on purchases made for Christmas.

To meet repayment obligations in the New Year, over half (53%) of those who struggled with repayments have cut back on spending, 24% take on extra work, and 16% sell items. Retail credit includes credit offered by retailers or banks that allows consumers to purchase items and pay for them later through a store credit card, buy-now-pay-later plans, or instalment payment options.

Suzy Homewood, Managing Director of Decisioning at Moneyhub said “For many people, the excitement of holiday spending can quickly become the stress of managing repayments in the New Year.

“New regulations such as the FCA’s Consumer Duty, and the upcoming Buy-now, Pay-later rules, have made it clear to firms that they need to do more to understand their customers financial situation, not just at application, but throughout the term of their loan

“Customers no longer want to be treated as a cohort, expecting instead for decisions to be made ‘about me,’ rather than “people like me.’ Open Banking provides data that can create detailed insights into an individual’s real-time income and spending. This enables lenders to evaluate customers more fairly as individuals, ensuring that those who can repay have access to credit, while also protecting vulnerable customers from falling into debt.

“Open Banking is not just good news for lenders either. By elevating customer experience and refining credit assessments, the use of Open Banking helps retailers foster stronger brand loyalty. When lenders and retailers work together to offer a more personalised approach to credit decisions, they not only elevate the shopping experience and reduce lending risks but also help retailers meet consumer demand safely.”