Over half of UK’s festive shoppers will rely on plastic this year
Just over half (51%) of Christmas shoppers will be relying on credit cards to cover the cost of their festive spending this year, and on average it will take three months to repay the debt.
While 44% of credit card users said that they expected to repay their Christmas debt by the end of January (within one month), 68% estimate that they will have fully repaid within three months, 23% reckon it will take three to six months, while 9% think that it will take over six months to clear their borrowing.
The survey also found that this Christmas 43% of shoppers will buy presents on their credit card and 14% will use a store card. For many (57%) of those surveyed, plastic cards help to spread the cost of Christmas, with over a third saying that if they didn’t use them they would have to spend a lot less. One in three Christmas shoppers said that the only way they could afford their festive spending was by using a credit or store card.
The survey also revealed that 63% pay by credit card for the added protection it gives for purchases over £100 while 59% use a credit card to build up loyalty or reward points.
Commenting on the research findings, Matt Sanders, Gocompare.com’s banking and credit card spokesperson said: “For many Christmas shoppers, credit cards are an effective way to spread the cost of buying presents, festive food and treats. And, it’s clear from our survey, that many people are aware of the extra consumer protection paying by credit card affords items costing over £100.
“However, when putting Christmas spending on plastic cards, it’s important to remember that you are essentially borrowing money - so don’t spend more than you can afford to repay. Most cards come with an interest-free period of up to 59 days. So, if you pay off your bill in full each month, you pay no interest. But if you can’t, card issuers add interest to your outstanding debt so the longer you take to repay your spending, the more money you will owe.”
Take control:
When your credit or store card statement arrives, don’t ignore it - your debt will increase as interest is added each month to the outstanding balance.
Don’t just repay the minimum amount:
Card issuers add interest to any outstanding balance, so the longer you take to repay your debt, the more you will owe. For example, it could take up to 15 years and 6 months to repay a debt of £2,000 if you only make the minimum repayment each month.
If you have more than one card, pay off the most expensive card first:
Make a list of all your unpaid credit and store card balances and corresponding interest rates and then pay down the card with the highest interest rate first.
Switch:
Transfer your credit card balance to a card with an extended interest free period on balance transfers – these usually charge a balance transfer fee of around 3%, which will initially be added to the debt, but is still worth doing if you can get 0% interest for a number of months, with some cards offering interest free periods on balance transfers for as much as 29 months.
If you are unlikely to repay a significant part of your debt during the 0% interest free period, switch to a card with a low interest rate for the lifetime of the balance transferred. This will immediately reduce the interest rate until the debt is paid off.
Avoid fees for missing your payments and for cash:
Typically card issuers charge for missed payments - avoid using your credit card as a cash card – the additional charges make this an expensive way to borrow money.
Don’t suffer in silence
If you’ve tried everything, or even if you’re just not sure what to do about your debt, it’s worth seeking advice. Talk to your card issuer, your local Citizens Advice Bureau, or a debt advice charity.