A million people to use payday loans to cover Christmas
A million people will be forced to borrow using payday loans to cover the cost of Christmas, according to a survey by the Money Advice Service (MAS).
Its annual Christmas spending survey also reveals that one third (32%) of UK adults (equating to 16m people) will pay for Christmas using credit cards.
Those surveyed told MAS that the festivities will cost them an average of £487 this year. While this is £21 less than last year's survey, over a third (38%) of people said Christmas Christmas will be more difficult for them to afford this year than last.
Worryingly, 34% of UK adults said they fully expected to start 2014 in debt because of the cost of Christmas, equating to around 17 million debt-plagued adults.
Jane Symonds of the Money Advice Service said: "Christmas is an exciting time to catch up with family and friends but can also be a worry financially, and very stressful if money is tight. Getting to grips with the costs in advance of the big day will help you take control of your spending and alleviate some of the pressure."
The Money Advice Service has launched a Christmas Money Planner tool to help consumers "prioritise the essentials" and determine where they could make savings this year.
Top tips to help you save money ahead of Christmas:
- Fix your budget: list what you expect to spend on Christmas - from presents and decorations to all other expenses such as food, socialising and transport. Be mindful that you'll have to keep some cash to pay the mid-January bills after Christmas.
- Boost your Christmas fund: If you're worried you won't have enough to cover the cost of Christmas, start to make savvy cutback snow, such as cutting out expensive daily coffees.
- Online or offline?: Shopping online can be cheaper than the high street, but not always. Watch for special offers, and check for discount vouchers online and in newspapers. When comparing costs, always check if delivery charges are included.
- Tempting treats: Opt to do food shops online if you can - home delivery removes lots of shopping stress, saves on petrol and is usually a lot cheaper overall, as it reduces panic or impulsive buys.
- Stock up and freeze it: take a look at what's in your freezer now, eat what you can to clear space for freezable Christmas essentials and frozen treats. Buying now and freezing essential items really spreads the cost and also reduces the stress of having to buy everything just before the big day.
- Get crafty: Home-made items are well and truly in vogue. Making gifts, decorations, and cakes is definitely more fun than battling through crowds, and cheaper than bought items.
- Store credit: If a high-street store offers you store card credit to cover the cost of your purchase, think twice. The cards usually have hefty interest rates and you're almost always best off avoiding them and paying via your usual payment method.
- Credit warning: Payday loans are advertised as quick access to cash, but can cost a lot more than you bargained for if you don't repay in full, and on time. Always explore all the alternatives before considering this option.
- Plan ahead: Deliver local cards by hand and send others second class to save cash.
- New Year's resolution: In January 2014, open a savings account and transfer a set amount via Direct Debit each payday. Over the course of a year, a small amount each month (say £10) could accumulate a tidy sum (£110) which could make a big difference when Christmas comes around again.
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.