Financial expert challenges Brits to change their ways and save up to £1,200 per year during the Credit Crunch
 

New research out today reveals that UK consumers could collectively save more than £14bn between now and 2012 by adjusting personal finances to cope with the new market conditions. By taking a few simple measures to put their house in order, the average Brit could save up to £1,200 a year.
 

The report, commissioned by credit card company Capital One, investigated the impact of spiralling prices on consumers, and the costs of different coping strategies that people have adopted.
 

Four distinct types of person emerge, grouped by their financial reaction to the changing conditions, and it's possible to calculate the gap between how the best and worst prepared Brits will fare over the coming years. This gap - over £1,200 per year has been dubbed the Cash Chasm. Those who don't adjust could be exposed to an extra £2,532 per year, whereas those who take action could limit the cost to about £1,200 per year.
 

The four behavioural groups range from those who don't even open bills to those who have made extreme cutbacks to their lifestyle.
 

The four types

Credit Cruisers

• Always on the lookout for their next 0% deal
• Use credit to top up their lifestyle, but don't worry about the balance because it's 'free money (0%)'
• Low / negligible savings
• Susceptible to "bargains" e.g. BOGOFs, free starter with any main meal

Financial Fixers

• Use credit cards for ease, emergencies and treats
• Plan their money and pay off some of the balance each month
• Too busy to chase the latest deal - would rather enjoy their free time
• Manage their money so bills are taken care of, but they can still have a treat

Debt Deluders

• Know that their money is a mess and things are getting worse
• Don't open the bills - it's easier not to know
• Don't switch, cut back or do anything - in denial
• Shop in the sales to "save" money

Cutback Kings

• Cutting back everywhere - gas / electric, clothes, entertainment, food
• Saving for trouble ahead, anticipating redundancy / reduced income
• But, too much cutting back makes them more likely to 'binge' spend
• Religiously pay-off their credit card and other debts
  
   

The best prepared are Financial Fixers, those who control their spending and have taken steps to lock down their costs. They clearly enjoy a significant cost benefit by being sheltered from wild price rises.
 

	Population %	Real cost of living rise - 2009	Cumulative Cost to 2012
Financial Fixers	9%	£1,296.60	£4,325.25
Cutback Kings	45%	£1,432.30	£4,777.90
Credit Cruisers	31%	£1,743.88	£5,817.30
Debt Deluders	14%	£2,532.90	£8,449.33

Capital One commissioned the report to gauge the impact and appetite for fixed rate credit card deals, which can give consumers greater peace of mind about their finances during the credit crunch. Significantly, Capital One is now introducing a new fixed rate card that offers one low rate of interest at 8.5% p.a. on purchases and balance transfers, guaranteed until 1st August 2012 (8.5% APR typical variable). There is no fee to transfer a balance from another credit card.
 

Srini Gopalan, Head of Capital One in the UK said: "This new card offers customers great value and takes away the headache of avoiding higher rates when an introductory rate expires. At a time when prices are going up everywhere, we want to offer our customers the certainty of knowing that the cost of any purchases and balance transfers will stay the same until 2012."
 

While the different groups exhibit vastly different habits the report concludes that all four groups need to adjust their behaviour to cope with rising prices and the new rules of personal finance.
 

Financial expert, Cesarina Holm-Kander, said: "The new economic conditions means there are new rules in the world of personal finance. The era of easy credit is drawing to a close and the head-in-the-sand approach is a non-starter. The good news is that those who take action now might actually be better off in the long term by introducing sound financial planning to their life. The bad news is that those who continue to ignore the warning signs are in for a shock if and when things get even worse."
 

Tips for coping with the credit crunch

1. Rocketing prices means that the key to managing costs is to fix whatever costs you can, whether it's your mortgage, credit card or gas and electricity bills
2. Look for ways to cut back. With tough times ahead, adopting sensible spending habits now will allow continued enjoyment without noticing the financial pain
3. When bills come in, pay them at once. Late payment charges are easy to avoid and you'll know right away what's left in your budget.
4. Spend wisely. Don't buy things just because they are cheap - buy them because they are needed
5. Budget ahead. Work out how much money there is for the fun things in life AFTER paying your rent, mortgage, bills. Fixing costs can really help with budgeting

 

For further details, please contact:

Sally Camm / Becky Paterson
Capital One
0115 843 3676 / 6484

Eddie Buckley
Lexis PR
020 7908 6515
 

Notes to Editors

1. Product terms and conditions:

Guaranteed 8.5% p.a. fixed rate on balance transfers and purchases until 1st August 2012. Credit available subject to status and conditions. New customers only. From 1st August 2012 your rate for purchases and balance transfers may change. 8.5% APR typical variable.
 

2. About Capital One:

A Fortune 500 company, Capital One Financial Corporation trades on the New York Stock Exchange and is included in the S&P 100 index. Headquartered in McLean, VA, Capital One is a diversified financial services company whose principal subsidiaries, Capital One, N.A., Capital One Bank (USA), N.A., and Capital One Auto Finance, Inc., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively have approximately 50 million managed accounts and $146 billion in managed loans. The Bank has won numerous industry awards for its products and services as well as accolades for its consistent work within the communities in which it operates. In 1996 Capital One launched its first overseas operation in the UK offering credit cards and savings products to UK customers. The UK headquarters and operations centre for Capital One Bank (Europe) plc is located in Nottingham. Capital One has more than four million customers in the UK. Capital One has consistently provided market-leading consumer-lending products to its customers. In the UK Capital One was among the first credit card issuers to offer a 0% introductory purchase rate, combining this with one of the lowest 'go-to' rates on the market. Capital One is authorised and regulated by the Financial Services Authority.
 

3. Methodology

• 1070 UK adults were questioned about their personal finances between 24 - 30 September 2008
• The data was analysed and grouped by Redshift Research to identify four behavioural groupings based on their responses
• On this basis, it was calculated that each group has incurred the following monthly loss as a result of rising prices and the credit crunch:

• Financial Fixers - £103.20 (9% of the UK population)
• Cutback Kings - £114.00 (45% of the UK population)
• Credit Cruisers - £138.80 (31% of the UK population)
• Debt Deluders - £201.60 (14% of the UK population)

• This data was then multiplied by 12 to create a projected annual 'cost'
• Annual inflation of 4.5% (source ONS report September 16 2008) was then applied to these figures to project a year-on-year 'cost' up to 2012, based on the same level of inflation
• The 'Cash Chasm' figure is taken by comparing the 2009 'cost' figure of the group with the 'best' financial behaviour i.e.

• Financial Fixers - £1296.60

with that of the three groups with the 'worst' financial behaviour i.e.

• Cutback Kings - £1432.30 (difference = £135.69)
• Credit Cruisers - £1743.88 (difference = £447.28)
• Debt Deluders - £2532.90 (difference = £1236.30)

• The 'cost difference' between each of the groups was then multiplied by the proportion of the UK adult population aged 18-65 (total 38,386,400 - source ONS) as follows:

• Cutback Kings - £135.69 x 17,273,880 = £2,343,913,505.86
• Credit Cruisers -£447.28 x 11,899,784 = £5,322,516,347.87
• Debt Deluders - £1236.30 x 5,374,096 = £6,643,981,986.97
• TOTAL = £14,310,411,840.69