Never mind 2012 - one in five Brits still paying off Christmas 2011
Cash-strapped Brits are suffering the hangover to end all hangovers: almost one in five consumers (17%) have yet to pay off debts from Christmas 2011, according to new research from uSwitch.com. And for many, the idea of a fresh start is a pipedream - one in five borrowers (19%) are starting 2013 with over £5,000 of debt on their credit card.
Christmas may be over for another year, but for the six in ten (59%) consumers who bought their presents on plastic in December, the debt hangover is likely to linger on. With pay rises unlikely to keep up with hikes in living costs, over half (53%) of consumers expect to take a year or more to pay off their credit card debt, while 15% say that it may take as long as three years to settle their balance. A worrying 7% can't imagine clearing it at all.
Unperturbed by money worries, however, only 29% of consumers cut back on costs this Christmas. Half (48%) spent roughly the same as last year and a further 23% consumers spent more this year than last, with one in ten (10%) spending over £1,000.
Michael Ossei, personal finance expert at uSwitch.com, says: "It's easy to get carried away at Christmas and merrily put everything on plastic, but there comes a time when people have to wake up and smell the coffee.
"Credit cards can be a practical and cost-effective way to shop - but only if you can clear your full balance at the end of the month. Most cards offer a 56-day interest free period, but once this is over consumers could be slapped with a hefty fee. Store cards can be even more expensive, charging as much as a stomach-churning 30% interest rate.
"Balance transfer cards can be a good choice for those struggling to clear their debt, offering more breathing space to pay off your balance, without letting the debt spiral out of control. There are some great options out there: Barclaycard currently offers a 36-month balance transfer card with a 4.9% interest rate and no balance transfer fee. And for those who are able to pay back their debt within two years, there are an even greater range of cards to choose from. But because balance transfer deals are so sought after, lenders can be choosy. You are more likely to qualify if you have a squeaky clean credit rating and a minimum household income of £20,000.
"If you do have to resort to a credit card as a means of managing your debt, then it is vital to the find the best card for your financial situation. Have a look at the current deals on the market and try to strike a balance between the interest free period and cost of doing a transfer. The key is finding the cheapest deal that comes with a timeframe you can comfortably work with."