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Derin Clark

Derin Clark

Online Reporter
Published: 08/01/2020

Over the coming weeks, consumers across the UK will be receiving their post-Christmas credit card bills, which for many will be uncomfortable reading.

In fact, according to the debt charity StepChange, 33% of British consumers planned to use credit to pay for part, or all, of their Christmas spending this year. In addition to this, it will take the average person seven months to pay off their Christmas debt, meaning that it will take until summer for the debt to be repaid. Fortunately, there are steps borrowers can take to make repaying Christmas debt manageable.

Make a repayment plan

When in debt it can be tempting to ignore the money owed, but this can lead to borrowers ending up in financial difficulty. Instead, those in debt, no matter how large or small, need to be aware of how much money they owe and to who. This will make it easier for borrowers to manage their debt and create a repayment plan in order to repay the money in a pre-set time frame. 

Prioritise debt

When repaying debt, it is important to prioritise which debt to repay first. Ideally, Christmas borrowers will only have a small amount to repay on a single credit card, but realistically Christmas debt could be part of wider debt. If this is the case, borrowers need to repay the debt that charges the highest interest rate first, then moving onto other debt. For example, going into an overdraft may lead to higher fee charges than the interest charged on a credit card, so if this is the case, it makes more financial sense to pay off the overdraft before tackling credit card debt. Saying this, borrowers should ensure they meet the minimum repayment each month as part of the borrowing agreement. 

Consider 0% transfer cards

Although deals on 0% balance transfer credit cards are at a record low, there are still some good deals available. A 0% balance transfer credit card is a useful way for those with credit card debt to move their outstanding balance onto a card where they will not have to pay interest on the transferred balance for a set period of time. As no interest is being added to the balance, it helps to make it quicker to repay. Borrowers just need to be aware that once the interest-free period comes to an end, interest is added to the remaining outstanding balance. The longest interest-free term on a balance transfer credit card is currently 29 months.

Avoid taking out more debt

While a balance transfer card can be a good way to pay off debt, it is usually only effective if borrowers avoid taking out more debt. This not only means spending on the new card, or taking out new loans and overdrafts, but also avoid spending on existing credit cards or going further into overdrafts. This might mean having to make cutbacks until it is repaid, but in the long-term it will help to avoid the debt becoming unmanageable.

Start saving for next Christmas

Although it is advisable to focus on paying off debts before starting a savings fund, once in a position to save, it is never too early to start saving for next Christmas. A Christmas savings fund will help to ease the financial pressure of Christmas and will ensure that next January is debt-free. Although savings accounts continue to offer low rates, there are still some attractive offers currently available in the easy access and regular savings charts.

Tips for managing debts:

Work out how much you owe – Make a list of who you owe money to and add up how much you need to pay each month. If you don’t have your most recent statements, contact your creditor to find out what you owe.

Prioritise your debts – Your rent or mortgage, energy and council tax are called priority debts as there can be serious consequences if you don’t pay them. These should always be paid first. Separate these and work out how much you owe.

Work out how much you can pay – Create a budget by adding up your essential living costs, such as food and housing, and taking away these from your income. Any money you have spare can be put towards your debts. Citizens Advice budgeting tool can help.

Paying urgent debts – You might have to contact priority creditors quickly in urgent situations, such as if you are about to be evicted. Tell them you're seeking debt advice so you can find a way forward. You could try to pay them something if you can afford to.

Paying non-urgent debts – If you have any money left after paying priority debts, consider getting a free debt-management plan. You’ll make one monthly payment to the plan provider, who will handle paying your creditors. Or contact your creditors and offer them what you can afford to pay.

If you can’t pay your debts – If you’ve got little or no money spare to pay your priority debts seek advice from us straight away.

Source: Citizen Advice


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