Post Christmas debt hits £9bn in January

Two thirds (63%) of households resorted to credit cards, loans and overdrafts to cover Christmas costs in 2022 according to new research by Credit Karma.

A total post-Christmas balance of £9.8 billion has prompted concern around managing repayments, as rising levels of borrowing coincide with higher household expenses for necessities, from groceries to heating and electricity.

The research found that 20% of consuemrs were pushed into debt for the first time in the last year due to the cost of living crisis as the nation’s average credit balance hit just above £900, equating to 60% of the average monthly household income.

Over the past 12 months, 32% of Britons say they’ve had to change their lifestyle to become more affordable with roughly a third saying their earnings don’t go as far as they used to (30%). In their desperation to meet costs, consumers admit to dusting off dormant credit cards (4%) or increasing their credit balance (7%) to get by.

35-54 year olds and parents are among those with the largest outstanding balances,3 but the study also shows that one in three (58%) over 50s are now dependent on debt as rising prices continue to acutely affect all income levels.

This comes despite many cutting back, making lifestyle changes to reduce their spending levels to counter the cost of living crisis. One in four (26%) had a simpler Christmas this year, but ultimately still found themselves in debt come January.

One in 20 (4%) are now facing unaffordable repayments, while others are considering ways to make instalments on their borrowing, from paying off the minimum balance (19%) to taking on extra work (12%) and selling unwanted Christmas gifts (6%) to raise cash.

With energy prices rising again for many in January, the cost of living still going up across the board, and interest rates on credit cards at a 16 year high, consumers should remain vigilant for the best rates available to them as credit dependency continues.

Akansha Nath, Head of Partnerships at Credit Karma said “Borrowing has become a reality for many households trying to keep up with rising prices over the past year. As our research shows, this has been unavoidable even for those who have made a concerted effort to cut back and reduce spending where possible.This can be understandably worrying and disheartening, as expenses look set to rise further in 2023.”

“For those looking to borrow, or faced with large repayments, I’d advise keeping an eye for competitive rates, only spending what you can afford to pay off, and ensuring your credit score is as strong as it can be, which can ultimately reduce the interest you end up paying back.”