Credit, Collections & Insolvency News
Rising living costs, reduced incomes, and cuts to support among the easons more people than last year will turn to borrowing to pay for the festive season according to research by StepChange debt charity.
The report says that this Christmas will be a time of financial distress for many households, with more people expecting to struggle to afford the festive season, or have to borrow to pay for it, than last year,
One in four people (24%) who celebrate Christmas expect to struggle to afford it this year, with a further 22% planning to cut back on normal expenses to pay for it. In total, less than half (45%) of those celebrating say they will be able to comfortably afford festive spending this year, compared with 50% who said they comfortably afforded it last year, with a further 2% not planning on spending anything.
Borrowing to pay for the festive season is on the rise. This year 8% of respondents who celebrate Christmas (around 4m people) expect to borrow to pay for it, while just 5% of respondents said they borrowed last year (around 2.7m people, an increase of nearly 50%. Of those who do expect to borrow to pay for Christmas, a quarter (24%), say it will take a year or more to pay back.
When asked the reasons behind their need to borrow to pay for Christmas, two thirds (65%) cited rising household costs as a driver, while reduced household income (25%), the loss of the £20 uplift to Universal Credit (16%) and the end of Covid support measures like furlough (12%) were also cited as factors.
Among those who intend to borrow, the most common form of credit people expect to use is a credit card, with three in five (59%) people saying they will use their card and pay it back gradually next year, with a further 15% aiming to pay back in full at their next statement. The second most common is Buy Now Pay Later, with over a quarter (27%) of those who expect to use credit anticipating using it for their Christmas spending.
The polling does show, however, that where people are able to, they are much more likely to cut back to afford the festive season than to borrow on credit, with 39% expecting to cut back on other spending or struggle with the cost of Christmas but not borrow.
The polling shows a marked divide between those whose financial situation has improved since the pandemic and those who have fared less well. 27% of people say their finances now are worse than before the pandemic, while only 16% say they are better off.
Phil Andrew, CEO of StepChange, said “Christmas, while a time of joy for many, can be difficult if you’re struggling financially. Millions of people are still trying to clear the backlog of debt accumulated during the pandemic, while the rising cost of living and the general struggle to make ends meet makes it harder for households to balance their budgets even without the costs of Christmas.”
“While advertising may promote the idea that you can spend and borrow your way to a happy Christmas, a January debt hangover can be the reality. If it’s going to take many months to repay what you borrow to pay for Christmas, it’s worth pausing for a moment to think about whether your friends and family would really want you to suffer financially as a result of your generosity. Most people would much prefer their loved ones to have a financially happy new year than gifts that may take months or even years to pay off.”