Fans of Grand Designs, the Channel 4 television programme, know that those home builders with more expensive taste than their budgets warrant end the programme with the sorry confession that they have maxed out their credit cards to pay for the build. In the worst cases they have to sell their new home or take on extra work to pay off the debt mountain.
It is not what anyone on that programme or involved in more modest home improvements should set out to do.
Not that you would guess it from an advertisement on the ‘home make over channel’ back in the summer. It was for the Sainsbury credit card and featured a couple talking about renovating their house and how a credit card helped them with it.
Socially irresponsible loan ad
With interest rates at record lows it begs the question why anyone would pay a representative rate of 18.9% APR to pay for home improvements. The Advertising Standards Authority has questioned how the expensive card debt was the best option and sanctioned Sainsbury for its lack of social responsibility. The ad will not appear again unless changed.
With personal loans and home improvement loans costing around 3%APR and the monthly costs fixed, home improvers have more certainty and can budget.
Zero interest loans can be expensive
While Sainsbury argued to the ASA that the credit card had zero per cent interest on loans transferred to it and was therefore a bargain, the slapdash couple in the ad would be likely to incur interest with new purchases.
When the FCA reported on credit cards earlier this year they found that 19% of customers that incurred interest were not expecting to do so. Zero interest cards can confuse many users or encourage them to spend more than they can afford.
As the banned ad said “terms and conditions apply”. Anyone planning building work or any other big spend should do extensive research to find out what the rules are all types of loans and to work out what they will pay.
The ASA also told Saisnbury’s Bank to ensure that their advertising in future did not present consumer credit products in a socially irresponsible way. After all the country has an enormous mountain of domestic debt that just gets bigger and will cost more when interest rates finally move upwards.