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Are you still paying off 2013 Christmas debt?

Are you still paying off 2013 Christmas debt?

Category: Debt

Updated: 04/11/2014
First Published: 04/11/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Christmas may be the most magical time of the year, but paying for it can be a nightmare. A lot of people find they need to turn to credit to fund the festivities, but that means many will be paying for it well into the new year – and some are still feeling the effects of last year's Christmas debt.

The financial hangover

According to research from Debt Advisory Centre (DAC), 34% of those surveyed borrowed money to cover some or all of their 2013 Christmas spend – and 10% of those are still paying it back. This figure almost doubles among the younger generation – 19% of 25-34 year-olds are still repaying the debt they built up last Christmas on credit cards, loans and other forms of borrowing. They're also more likely to have borrowed, with 55% having done so, compared with 23% of over-55 year-olds.

The amounts still to be repaid are also a cause for concern. Of those who are still repaying their 2013 Christmas debt, just 11% said they had less than £100 still to pay, while 40% have more than £500 left and 22% have £1,000 or more still on their credit sheet.

The survey also found that the number of people who borrowed to cover the cost of last Christmas was far higher than those who did so in 2012 – 34% in 2013 compared with 18% the year previously – and it's set to be another problem this year. The figures show that 13% of respondents anticipate that they'll need to borrow to cover some or all of their festive spending, with just 52% being able to cover the cost from their earnings.

This not only highlights an ongoing reliance on credit, but also indicates that the improved economic situation may not be reflected in people's wallets. It also paints a worrying picture for the year ahead, particularly if those who haven't yet paid off 2013 debt are forced to borrow again, with the cycle of debt set to continue.

Ian Williams, spokesman for DAC, says: "Christmas can be an expensive time of year what with all the presents, cooking and travel most of us indulge in. For many people, the excess quickly becomes excessive spending and they are tempted to turn to credit to cover the cost.

"However, to still be repaying this borrowing nearly a year later is worrying – particularly if people plan to borrow again this Christmas. If you're already juggling debts built up last year and are planning to borrow again this year – if you can – because your finances are too stretched to cover the expense of the festive period, it might be time to seek professional debt advice."

What can I do?

As Ian Williams says, it's always a good idea to talk to the debt experts if you're feeling overwhelmed and are struggling to make repayments. There are a couple of practical steps you could take, too, and although it could take a bit of financial juggling, it could be worth it – both to prevent last year's debt from getting too much, and to avoid the problem repeating itself next year.

  • Switch the balance of your credit card to one that offers 0% interest on balance transfers. This should be at the top of the list, as it can be a far better way to manage your repayments and can help you get debt-free sooner. Some interest-free periods last as long as 34 months, and because you won't be accruing any more interest during that time, you'll have plenty of time to pay off the balance without adding to your debt. Just make sure you don't spend on these cards, otherwise interest could be applied that would completely negate any benefits.
  • If you need to turn to credit this year, make sure you spend wisely – by opting for a card that offers 0% interest on purchases. These cards can be ideal for Christmas shopping, letting you buy everything you need without accruing interest, and as long as you pay the balance off before the interest-free period expires – some last as long as 20 months, but you'll ideally want to pay it off sooner – you could have a great way to spread the cost.
  • If you're really struggling, STOP USING CREDIT! It could mean making a few sacrifices, such as forgoing expensive gifts this year and having a more meagre feast, but if your repayments are already getting too much, you don't want to add to the burden. Be a budget-conscious Christmas shopper and hunt out the bargains, take advantage of discount codes and vouchers, or even make your own gifts and cards – anything you can do to avoid racking up more debt, the better!

What next?

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.