Consumers must be careful when borrowing around Christmas, warns one of the UK’s lenders.
Festive spending can leave households and consumers short of money for essential bills in January. Although Christmas is a time for celebrating with family and friends, relying on expensive credit to pay for presents, food and socialising can create financial problems that last well into the new year.
According to the Bank of England, UK households spend around £713 more in December than in a typical month, an increase of 29%.
Meanwhile, research by the Institute of Practitioners in Advertising found that the average British consumer expected to spend around £594 on Christmas-related items and activities in 2024, including gifts, food, travel and decorations. These figures show how quickly festive costs can add up.
The Christmas payday trap
One of the biggest financial risks comes from the timing of December wages. Many employers pay staff early before Christmas, meaning workers may receive their salary in the middle of December rather than at the end of the month.
With many people also taking around ten days off work over Christmas and New Year, spending can increase while income remains unchanged. The problem comes when the next payday does not arrive until the end of January. Depending on their pay dates, some workers can face a gap of around six weeks between paydays.
During this time, rent or mortgage payments, energy bills, food shopping and travel costs still need to be covered. Anyone who spends too much of their early wages on Christmas presents, parties and meals out could struggle to make ends meet in January.
Be careful with expensive borrowing
A spokesperson for The One Stop Money Shop commented:
“When money runs short, some consumers turn to high-cost loans, credit cards or overdrafts to cover everyday expenses.”
“Although these options can provide quick access to money, they can also make financial pressure worse.”
“High-cost loans can charge substantial interest, sometimes more than 500% APR, while unauthorised overdrafts may attract fees and interest.”
“Credit card debt can also become expensive when balances are not repaid in full and interest starts building up. Making only minimum repayments can mean that debt takes much longer to clear.”
Before borrowing, consumers should consider whether they can realistically afford the repayments alongside their usual household bills. They should also compare the total amount repayable, interest rates and any fees rather than focusing only on the size of the monthly payment.
Plan ahead and manage spending
Dan Kettle, of consumer finance company Pheabs.com commented:
“The best way to avoid Christmas debt is to start planning early.”
“Setting a realistic budget for presents, food, travel and socialising can help consumers understand what they can afford. Saving a small amount each month throughout the year can also make Christmas more manageable.”
“Shoppers should compare prices, look for genuine discounts and avoid buying gifts simply because they feel pressured to spend. Agreeing spending limits with family and friends, buying second-hand items where appropriate and organising less expensive activities can all help reduce costs.”
“It is also important to keep enough money aside for January bills and everyday essentials. Consumers should work out how much of their December wages must last until their next payday before deciding what they can spend on Christmas.”
Could a 0% credit card help?
A credit card offering 0% interest on purchases may be cheaper than a high-cost loan or an expensive overdraft, provided it is used carefully. Introductory offers for up to 24 months can allow eligible borrowers to spread the cost of purchases without paying interest for a set period.
However, consumers should check the length of the offer, any fees and the interest rate that applies when it ends. They should make at least the required monthly repayments and aim to clear the balance before the promotional period finishes. Missing payments or spending beyond their means can undermine the benefits.
A 0% card is not extra income, and borrowing should only be considered when repayments are affordable.
Watch out for Christmas scams
Festive shoppers should also be alert to scams. Fraudsters may send fake delivery text messages asking people to pay a small fee or click a link. Instagram and other social media platforms can feature fake shops, counterfeit products and deals that look too good to be true.
Consumers should avoid clicking unexpected links, check sellers carefully and use secure payment methods. If a message claims to be from a delivery company or bank, contact the organisation through its official website or app instead.
