Plum users shun non-essentials as cost-of-living crisis bites
Plum users are slashing their spending on key non-essential areas as they tighten their belts amid the rising cost of living – with the business moving to increase its savings account rates to further help users.
Plum’s customer spending data shows a clear pattern of immediate cost-cutting. The latest spending and saving data of 500,000 Plum users shows personal care spending is down 22.5% month-on-month while health and fitness is down 15.5% and entertainment spending 15.1%.
Spending on home entertainment such as TV subscriptions is down 11.8% while groceries and dining out have decreased 8.8% and 6.4% respectively.
With regards to essential spending, energy bill costs have rocketed month-on-month thanks to the energy price cap hike, with the average spend increasing 26.9%. The amount spent on fuel has risen 9.4% in April alone.
Following the hike of the Bank of England base rate and to help people make the most of their finances, savings rates have been increased for Plum users.
Customers who subscribe to Plus, Pro or Ultra tiers (starting at £1 per month) can earn the best interest rate of 1.01% AER (up from 0.40% AER) on the firm’s Easy Access Interest Pockets. The rate for customers using the Basic tier has increased to 0.50% AER, up from 0.25% AER.
These are protected by the Financial Services Compensation Scheme (FSCS) and are provided by Investec Bank Plc.
Victor Trokoudes, CEO and co-founder of Plum, comments: “The cost-of-living crisis is really beginning to bite households, and this is unfortunately reflected in our in-house user spending data.
“People are cutting back on non-essential spending and this is shifting directly into essential categories such as energy and fuel. This is tough for households, but it will also begin to reflect in the wider economy as businesses feel the effects of this reduced spending.
“Personal care and health and fitness and entertainment have seen the biggest cutbacks, with groceries and dining out not far behind. With energy bills unlikely to come down for the foreseeable future, we expect this trend to remain steady as households adjust to a difficult new normal.”
On the recent Plum rates rise, Victor adds: “We’ve raised our savings rates in line with the Bank of England base rate hikes to pass on the benefit to our customers.
“Alongside our newly-launched stock investing offering, Plum users now have access to a wide range of personal finance products to help them make their money go further.
“While the cost-of-living crisis isn’t going away any time soon, we want to do everything we can to help households manage their money better in order to stay ahead of rising prices. Ultimately this then translates into making their savings work harder.
“While rates are still well behind inflation, long-term wealth is still best placed in the stock market for growth.”