Christmas is a time of frivolity, but when consumers are splashing borrowed cash, interest soon builds up and there can be only one outcome; yet more debt. Despite the cost of living rocketing over the past few months, coupled with the highest unemployment rates in 17 years, resilient consumers in the UK refuse to change their lifestyles and it looks set to be a good winter for retailers.
Although good for the retailers, this is expected to have a long-term effect on the consumer, unless they take action to repay debts quickly. Figures revealed by Money Supermarket confirm that consumers who plan to fund the festive season on credit cards could end up repaying debts until 2023 if minimum payments are made. Consumers are showing no sign of slowing down when it comes to obtaining credit. The annual rate of growth for consumer credit rose to 2.3%, the highest rate seen since May 2009.
The figures also show that consumers with credit card balances of £500 and an average APR of 18.12% will take 11 years and 8 months to fully repay the debt. Consumers who only meet minimum monthly repayments of 2.5% will end up paying a staggering £477 in interest.
The current average household debt in the UK stands at £8,042, excluding mortgages and £55,822 with mortgages. The figure looks set to climb over coming months with inflation on the up and the cold winter driving energy bills through the roof.
Consumers are advised to spend carefully over the Christmas period and are encouraged to pay off any credit as soon as possible and to avoid falling into the minimum payment trap. Debt Management and IVA solutions remain ever-popular options for those struggling to cope with spiralling debts, but the true effect of consumers’ ‘care-free’ attitude towards credit remains to be seen.
Debt advisers from Moneysolve commented that: “The decision to pay for Christmas on credit is a big one that could leave you with a financial headache well into the next year.