'Christmas is coming and the financial companies are getting fat, please put your entire wealth, and that of your kids, in the old man's hat'.
I love Christmas, don’t get me wrong, everyone's happy, saying happy things to each other like 'happy Christmas' and 'seasons greetings'. It's just great.
Shopping however …. Well I have to say, I don’t get it really. You can be married 40 years but spend 32 stood outside of a shop, occasionally putting your thumbs up through the window to acknowledge the next dent in the bank account. Hey Ho! I am currently experiencing the training of my three daughters, who are clearly already pre-programmed into shopping as a skill and something to be enjoyed… Long sigh!
Personally, a trip to the internet and a trundle across a new website 'treatalady.com' that works out what you should buy is a great plan for me. Instead of panicking at 4.05 on Christmas Eve and dashing out, I can click a button and let someone else do the thinking. Christmas is great again.
All joking aside, it can also be a tough time for families. There is considerable pressure on children to have the very latest doofer or dwidget thingy and this can result in the finance companies making a fortune. It really is quite easy to spend Â£1000, but paying Â£1000 back is a rather different experience.
And so, I turned to have a look at what some companies are charging. Commercialism works by creating a brand and that’s achieved by creating a 'superstar' individual who is then the advocate of a brand, and all that money is layered on top of the cost of the product. That brand now carries a premium on its price, and if they get the numbers right, they do well and make money and vice versa.
Argos think they have a brand. They probably do.
Argos credit card customers are now paying a staggering 29.9% APR – or near sixty times the Bank of England base rate(1). Phenomenal! The average decent credit card is still extortionate at c16.7% but it’s a far cry from Argos' brutal offering which is nearly 80% more expensive(2).
You can also borrow on a loan with them at a superb 11.4% (or twenty three times the base rate)(3). These rates are very unfavourable to the customer and make the XBOX kinect considerably more expensive than the bargain you thought you had. Argos uses an example of the cost of a Â£25,000 loan on their site so I compared that with another provider – Platinum loans. The total cost of credit over the ten year period was Â£16,128.80 with the Argos loan, which is organised by Nemo finance. The total cost of the credit with a competitive provider such as Platinum was Â£10,664. And so, Argos is 51% more expensive. Read that again(4).
Argos also offers life insurance for customers from Axa Sunlife.
I don’t get it.
How is this related to their brand? Either way, because they are tied to Axa Sunlife for this product, they will receive a commission. In return, the customer will receive life insurance, which is not independent, and as such will not be competitive. For example, the total insurance for Axa for a 52 year old for Â£67 per month is Â£19,745(5). The best an Independent Financial Adviser could achieve is 135% more cover at Â£46,531(6). On top of this the life insurance with Argos' chosen provider will not pay out this death benefit in the first two years. For the first two years, the plan will only return you one and a half times the premiums you have paid.
Now, I am not picking on Argos, it's just they have made it quite easy for me. I am sure I could have a similar slash at many of the high street 'brands', so all I will say as a parting Christmas gift is be very careful what you buy, where you buy it, and how you pay for it.
Remember credit is often described as money you don’t have used to buy things you don’t need.
If you have a life insurance, loan or mortgage you would like an independent view on call Peter on 0845 230 9876, e-mail firstname.lastname@example.org or take a look at our website www.wwfp.net.
The value of shares and investments can go down as well as up
(6) The exchange
Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. 'The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'