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Festive borrowers take three months and six days to pay off Christmas debt

17 December 2013

Debts from Christmas presents set to haunt Brits like the ghost from Christmas past

  • 35% of borrowers estimate it will take over three months to clear Christmas debt
  • 3% of adults are still paying off the cost of last Christmas
  • Only 35% think their finances are in good shape

Brits relying on their credit cards or other loans to cover the cost of Christmas take on average three months and six days to pay-off their festive spending. While just over a quarter of borrowers (26%) said that they expected to repay their Christmas debt by the end of January, 14% thought it would take them over six months, with 6% fearing that it would take them over a year.   

The research into the nation’s festive spending plans, commissioned by comparison website Gocompare.com, found that 37% of Christmas shoppers will use a credit card or borrow money to pay for their purchases. The survey also revealed wide regional differences in the length of time expected to pay-off Christmas spending:

Region

Estimated length of repayment

Within a month

Up to 3 months

3 to 6 months

Over 6 months

North East

17%

62%

13%

25%

North West

21%

66%

27%

7%

Yorkshire & The Humber

23%

56%

21%

22%

East Midlands

29%

79%

7%

14%

West Midlands

34%

71%

15%

15%

East

22%

61%

26%

13%

London

30%

71%

19%

8%

South East

22%

60%

29%

12%

South West

24%

63%

20%

18%

Wales

19%

59%

28%

12%

Scotland

33%

66%

22%

12%


When asked to describe their finances in the run up to Christmas only 35% of respondents thought they were in good shape, 11% said that they couldn’t really afford Christmas this year and 9% were worried about how they would pay for the festivities.

Matt Sanders, Gocompare.com’s banking and credit card spokesperson commented: “It’s clear from our research that many people are feeling financially squeezed this Christmas and are worried about the cost of this year’s celebrations. 

“Used sensibly, credit cards can be an effective way to manage your money and spread the cost of Christmas. But, with the pressure to deliver the perfect Christmas – it is all too easy to lose track of your spending and for things to get out of control.

“Any money you spend using your plastic has to be repaid with interest, so setting and keeping to a budget for your Christmas spending - based on the amount you can afford to repay in the shortest time possible - will help reduce a post-Christmas financial hangover.”

Gocompare.com’s tips on effective debt management:

The first step to managing debt is to take control:

When your credit or store card statement arrives, don’t ignore it, in the hope that it will go away. Rather than disappearing - your debt will increase as interest is added each month to the outstanding balance.

Don’t just make the minimum repayment:

Card issuers add interest to any outstanding balance, so the longer you take to repay the debt, the more money you will owe. For example, it could take up to 15 years and 6 months to repay a debt of £2,000 if you only make the minimum repayment each month*.

If you have more than one credit or store card, pay off the most expensive card first:

Make a list of all your unpaid credit and store card balances and corresponding interest rates and then pay down the card with the highest interest rate first.

Switch your credit card:

Transfer your credit card balance to a card with an extended interest free period on balance transfers – these usually charge a balance transfer fee of around 3%, which will initially be added to the debt, but is still worth doing if you can get 0% interest for a number of months, with some cards even offering interest free periods on balance transfers for as much as 29 months.

If you are unlikely to repay a significant part of your debt during the 0% interest free period, switch to a card with a low interest rate for the lifetime of the balance transferred. This will immediately reduce the interest rate until the debt is paid off.

Avoid fees for missing your payments and for cash: Typically card issuers charge around £12** for missing your payment date. Avoid using your credit card as a cash card – the additional charges make this an expensive way to borrow money.

Don’t suffer in silence
If you’ve tried everything, or even if you’re just not sure what to do about your debt, it’s worth seeking advice. Talk to your card issuer, your local Citizens Advice Bureau, or a debt advice charity.

-ends-

Notes to editors:

On 25th November 2013, Vision Critical conducted an online survey among 2,007 randomly selected British adults who are Springboard UK panellists. The margin of error-which measures sampling variability-is +/- 2.2%. The results have been statistically weighted according to the most current education, age, gender and regional data to ensure samples representative of the entire adult population of United Kingdom. Discrepancies in or between totals are due to rounding.

*Based on a £2,000 balance on a card charging 18.9% APR with a minimum monthly repayment of 3%.

**Based on late payment fee from three providers, Barclaycard, Halifax and NatWest.