Almost one in five (18%) people will put at least some of their Christmas spending on a credit card, according to Hargreaves Lansdown.
Research by the investment platform found that one in 14 (7%) will use buy now pay later deals for Christmas, one in 20 (5%) will use a store card, and one in 20 (5%) will borrow from family or friends. About 7% have no idea how they’ll pay for Christmas – so they may end up borrowing.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Festive hangovers are in plentiful supply at this time of year. But while it might not be too dangerous if you’ve had one too many glasses of eggnog, if you’ve overdone the festive spending, that’s a hangover you can carry well into the New Year. For the past couple of years, rising prices have meant overspending is a particular risk, so before it’s too late, it’s worth being aware of the potential pitfalls, and how to avoid them.
“The rising price of everything has sent the cost of Christmas through the roof, so the average person will spend £569. Simultaneously, the cost of everything else has made this kind of sum increasingly difficult to find. As a result, the number of people who say they can cover at least some of the cost of Christmas from their income has dropped since the onset of the cost-of-living crisis from 55% to 50%. Among those with children living at home it has fallen to 40%.”
How to avoid the January money blues
Take stock
If you’re running out of cash or are already in debt, work out an accurate picture of your current situation. Consider what you’ve already bought, what money you have left –and what else you definitely need to get.
Make cuts
If you’re hosting Christmas dinner, consider asking friends or family to bring some items. If you have presents left to buy, will some of those people agree to skip gifts this year? If there are events that will cost money, which ones do you most want to go to, and which ones can you miss?
Try ‘unshopping’
Cuts should extend to things you’ve already bought. If you’ve overdone it, what can you take back? Alternatively, are there any people you could agree not to buy for, and return their gift or give it to someone else instead?
Say “no” if you need to
The power of ‘no’ is life-changing when it comes to spending. At Christmas, we somehow feel we’ve failed people if we don’t attend everything we’re invited to, or buy everyone their must-have gift. Saying ‘no’ means you can stay within your budget – and avoid social events you’re not keen on.
Be upfront
Don’t be afraid to be honest with your loved ones – there’s nothing wrong with telling friends and family that you can’t afford to splurge this Christmas in case you go into debt. Most people would rather you avoided difficult debts than bought something you couldn’t afford.
Borrow carefully
If you do need to borrow this Christmas, think carefully about the most sensible way to do it. If you know you’ll need to put some purchases on a credit card, plan ahead and apply for one with a low rate, or a 0% deal on purchases for long enough to have paid it off.
Once you get a card, don’t just make the minimum repayments each month. If you don’t pay it off faster than this, you’ll rack up enormous interest charges and could take years to pay the money back.
Try not to use your overdraft – most banks charge close to 40% APR on overdrafts now. Be wary of buy-now-pay-later too as there is a risk that buying multiple items this way will mean you rack up more debt than you can afford to pay back.
