Three Ways for Consumers Take Control of Their Credit, Amid Festive Financial Frenzy

  • Digital banking , Credit Cards
  • 01.12.2021 09:40 am

-        Zopa Bank highlights three key questions for a fun yet financially responsible holiday season

-        Zopa credit card spending increased 45% over Black Friday weekend

-    One in two Zopa customers improved their credit score using Zopa tools

Digital bank Zopa has revealed customer spending on its credit cards increased by 45%, month on month, over the Black Friday weekend (25th - 29th November). The figures also indicate that the Black Friday frenzy has shifted earlier this year, with spending on Monday 22nd November more than double that of Cyber Monday (29th November). 

In response to this, and figures seen from other providers, the bank is providing guidance on how consumers can take a balanced approach to their spending this festive season - to make sure that a great Christmas doesn't have longer term negative impacts on their finances. This includes measures to help them continue to protect or improve their credit score so that they can access credit at their best rates - 45% of Zopa customers improved their credit score using Zopa’s Borrowing Power tool in 2021. 

As the Bank of England’s Money and Credit figures reveal, using tools like this will become increasingly important, as customers are returning to pre pandemic credit habits, taking on more debt than they’re repaying.[1]  

Clare Gambardella, Chief Customer Officer at Zopa says:

“After the restrictions of the last two years and the disappointment of a 2020 lockdown Christmas, UK consumers want nothing more than to enjoy a fun and stress-free holiday season. But that doesn’t have to mean spending at a level which could put them in a worse position going into 2022. 

It is especially important for card providers to help customers make sense of the more technical parts of lending like interest rates and credit scores, and to explain the importance of taking a medium term, responsible approach to credit in order to improve financial health

Using a tool like Zopa’s Borrowing Power can help customers to access their best possible rate on new credit, and keep on budget once they start using it. This will be particularly useful, given predicted interest rate increases in the New Year”

According to Zopa, consumers should ask themselves three key questions, before taking on credit: 

  • Do you understand your interest rate? 

Ensure you’ve got the best rate before you start borrowing. Most people don’t know that credit cards often come with a range of APRs. The higher your credit score, the more likely you are to get approved for an APR on the lower end of the range, meaning you’ll pay less interest.

  • Can you improve your credit score? 

Understand what you can do to improve your score before taking on credit. This could include:

·         Registering for the electoral roll

·         Making sure your loans and other financial products are linked to your current address

·         Maintaining a good level of disposable income

·         Avoiding hard credit searches until you are sure you want to take a product

·         Keeping your credit usage low

·         Building resilience for a rainy day, by ring fencing a part of your credit limit for unexpected costs like bills or boiler breakdowns

Credit tools like Zopa’s Borrowing Power help customers to understand what rates they are likely to get based on their current score, and how they can improve that over time.

  • Can you shop around to get a better deal? 

You may find that shopping around helps you if you have a less established credit file. For example, Zopa’s partnership with ClearScore uses open banking technology to look at your real time financial situation rather than just your credit score. This allows Zopa to offer a pre-approved credit card to some users who may have previously been declined credit products due to their thin credit file.

Since the launch of the bank in June 2020, Zopa has attracted £850m in deposits into its fixed term savings accounts, issued 185,000 of its British Bank Award-winning credit cards becoming a top 10 credit card issuer, and more than doubled revenue per customer.   

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