It takes five months to repay Christmas debt
Just over half of people expect to spend more than they earn in December, with the average cost of Christmas per family sitting at £687.40. This includes gifts, food and going out.
While the average time taken to repay Christmas debt is five months, according to The Nationwide Current Accounts survey, one in ten are going into Christmas 2017 still paying off last Christmas.
Six in ten have a budget in mind for Christmas but 45% said they think they’ll be able to stick to the limit. Nationwide found that more than two fifths will use savings to fund Christmas, while 24% use a credit card. However, 6% have used a loan.
Savvy Brits are preparing ahead of time by buying presents in advance (48%) while a fifth put money aside each month to build up a Christmas piggy bank. The research suggests the average Brit starts stocking up for Christmas three months in advance while a fifth buy presents six months or before. But 18% still leave it until December.
Despite the mounting costs of Christmas, 70% refuse to cut back on spending this year, instead preferring to face the financial consequences in the New Year. More than half (54%) said they will cut back spending in January, with around a third (32%) saying they are planning to spend more nights in to save money.
The research showed that Brits are spending more money online on the big day itself – an average of £179, having risen from £122 in the previous year. In total, Nationwide debit and credit card customers spent over £20m on 25 December, £3m more than in 2015.
John Hutton, Nationwide’s director of payments, said: “Christmas is one of the most expensive times of the year, with expectations running high on presents, nights out and visits to family and friends. Our research shows that many people are spending beyond their means in order to have a fantastic day, with many taking months to repay the costs.
“We’d always advise sticking to a budget and where possible use savings or spare cash to help cover the costs in the first instance. However, borrowing doesn’t have to be a last resort – using a credit card might actually be an effective way to cover costs. Plus, you’re also protected through Section 75 on goods costing between £100 and £30,000. But make sure at least the minimum is paid off each month to avoid additional interest and ensure you are able to pay off the costs in full.” If you can, you should arrange to pay off your credit balance in full at the end of each month. This will save significant charges over the longer term.