Cash-strapped Brits are suffering the festive hangover to end all hangovers, with almost one in five (17%) yet to pay off debts from Christmas 2011, according to new uSwitch research.
And for many, the idea of a fresh start is a pipe dream – one in five borrowers (19%) are starting 2013 with over £5,000 of credit card debt.
Christmas may be over for another 12 months but for the six in ten (59%) consumers who bought their presents on plastic in December, the debt hangover is likely to linger well into 2013.
Credit card debts lasting the distance
With pay rises unlikely to keep up with hikes in essential living costs, over half (53%) of consumers expect to take one 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 full balance. A worrying 7% can’t imagine clearing it at all.
Unperturbed by money worries, 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.
Balance transfer offers can help
Michael Ossei, uSwitch personal finance expert, says: “It’s easy to get carried away at Christmas and merrily put everything on plastic, but there comes a time that everyone has to wake up face the music.
“Credit cards can be a practical and cost-effective way to shop, but only if you can pay off your full balance at the end of the month. Most cards offer a 56-day interest free period, but once this is over you could be hit with a hefty fee.
“Balance transfer cards can be a good choice for those struggling to clear their debt, offering borrowers the chance to pay off their balance at their own pace.
“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 able to pay back their debt within two years, there’s an even greater range of cards to choose from.
Balance transfer fees vs interest-free periods
Mr Ossei continues: “Because balance transfer deals are so sought after, lenders can be choosy. Applications are more likely to be accepted if you have a squeaky clean credit rating and a minimum income of £20,000.
“If you do have to resort to a credit card as a means of managing your debt, then it’s vital to the find the best card for your financial situation. Compare current deals on the market and aim 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 time frame you can comfortably work with.”
Debt advice and information
If you’re worried about your post-Christmas finances, it’s vital to seek help from professionals as well as doing your own research.
Debt help charities and advice services such as StepChange (formerly the Consumer Credit Counselling Service), National Debtline, and the Citizens Advice Bureau provide free and impartial advice to anyone looking to better manage their finances.