UK debt is in the news, causing alarm among some observers concerned about growing repayment obligations piling-up in some households. Consumer confidence remains defiant, however, contrasting gloom and doom forecasts about problem debt levels. Whether or not there is strong enough evidence to accept dire forecasts about Britons ability to repay their outstanding balances; a leisure trends has developed, helping some families keep costs down.
The summer holiday season is generally marked by substantial credit purchases, as families travel overseas, taking advantage of breaks in school schedules. Compared to last summer, this year’s spending figures illustrate a different approach, resulting in fewer charges abroad. Britons appear to have embraced ‘staycations’ as a summer holiday money-saving strategy.
Trend Highlights Holidays at Home
UK Finance recently reported a sharp drop in debit card spending overseas, when compared to the same period in 2016. The body pointed to figures compiled about spending this August, down almost 13 per cent compared to last year. As sterling has lost ground, it appears families cut corners during the summer holiday travel season, as a money-saving measure.
UK Finance indicated the summer numbers are in-line with figures for the entire year, reflecting less debit card spending overseas for the year, on the whole. In August, 2017, a total of £3.16bn was spent overseas, up from July, but substantially less than the £3.61bn reported in August, 2016. The spending decline is thought to reflect reaction to the diminished buying power of the pound, particularly following the Brexit vote. Whether or not borrowers have strong credit references, several alternatives are available for financing overseas travel – often without a formal credit check. And debit card spending has actually risen overall. Still, the preference to enjoy summer holiday within the UK can be reasonably interpreted as related fallout from sterling’s slipping buying-power against other currencies.
The UK Finance monthly debit card report also took into consideration alerts shared with consumers, regarding charges applied to debit card purchases made overseas. It seems some eating establishments, stores, and even cash machines extend an option to UK travelers, allowing them to pay in pounds, rather than local currency. Unfortunately for those who agree to the offers, a poor exchange rate is then applied to the transactions, further undermining the value of the pound. It is thought consumers sacrifice as much as 10 per cent when paying in sterling, rather than using local currency to pay travel expenses. And a BBC calculation shared in July estimates the poor exchange rates related to these types of transactions may collectively cost Britons £500 million annually.
Despite the “staycation” trend, debit card spending at home increased during the summer. August numbers were up .8 per cent, compared to July spending. And average monthly spending on each debit card rose from £442 to its current level of £476. The increase can be partially attributed to rising inflation.
Prior to the summer season, more than 2000 Britons were polled about their travel plans. In all, more than 40 per cent indicated sterling’s decline would impact their decisions. Sixteen per cent said they’d definitely stick closer to home, rather than take a family holiday overseas. And it’s no wonder. February figures leading up to the prime travel season showed poor exchange rates. In America, for example, £500 was worth eighty-eight dollars less than it was at the same time last year, and travelers to Australia could only be expected to get back A$830 for a conversion of £500, down considerably from last year’s figure of A$1014.
British families are making prudent moves to stave-off growing debt, in the face of rising inflation. Many have opted for recent stay at home holidays, rather than ringing up debit card charges overseas.