One in four Brits are relying on credit cards to fund Christmas this year

As we enter December, preparations are well underway for the festivities, but how are people in the UK coping financially with the cost-of-living strain?

Following on from their 2021 report, credit management company Lowell has conducted further research into the impact Christmas will have on UK household finances, compared to 2021.

Last year, the average British adult spent £548 on presents alone. With 55% more Brits feeling the pressure to buy extra this year, it could be questioned if these figures can be funded again in 2022.

What are the main spending pressures people are feeling for Christmas?

Currently, 34% of people in the UK anticipate that they will buy more than they need, a 55% increase since 2021. More than a quarter (28%) expect to spend beyond their budget, and 18% feel under pressure to buy more expensive luxury items despite inflating costs.

What are the main pressures faced this Christmas? 2022 2021 % change
Buying more than is needed 34% 22% 55%
To overspend on what I can afford 28% 21% 33%
Buying large, expensive items 18% 14% 29%
Buying more premium brands 15% 13% 15%

The impact of social media is also adding a strain to people’s buying habits, with 15% more Brits overstretching themselves financially to buy premium brands compared to last year. Plus, one in 10 (10%) admit to feeling pressure from Facebook, Instagram and TikTok to keep up with new trends.

Whilst Christmas is a wonderful time of year, it can be a financial worry for many, with a quarter (25%) of Brits claiming they are having to cut back as much spending as possible due to the cost of living crisis. Furthermore, 25% of people are concerned that they won’t be able to heat their homes amid rising energy bills, and 14% will be putting up fewer Christmas lights as a way to keep costs down.

How are Brits funding their Christmas?

This year, there has been a 47% increase in credit cards being used as the main funding source for Christmas. More than half (51%) will dip into savings, and one in ten (12%) are opting for Buy Now Pay Later schemes. Encouragingly, 40% more Brits are going to rely on their disposable income, instead of outsourcing other finances.

Funding Plan 2022 2021 % Change
Savings 51% 39% 31%
Disposable income 49% 35% 40%
Credit cards 25% 17% 47%
Buy now pay later 12% 11% 9%

What is the debt aftermath of Christmas?

Whilst credit can provide the flexibility to spread the cost of larger purchases, it must be used responsibly. With spiralling interest rates increasing the cost of borrowing, those unable to pay off the debt in full could be left struggling if an unexpected expense occurs in the New Year.

Almost one in five (18%) Brits believe their debt might reach at least £600 this year, not including any late fees or additional interest accrued on balances carried past the due date. Furthermore, 17% of people in the UK predict it will take until Easter next year to pay off their Christmas debt, that’s a third of the year paying back what was spent over the festive period.

With the annual percentage rate (APR) on UK credit cards reaching an all-time high this year[3], it could be easy to be left with even more money worries post-Christmas.

For example, using just the monthly minimum payment of £30 to pay off £600 in credit card debt (with an average APR of 21.8%, and no further spending on the card)[4] could take over two years[5] to repay, with an interest cost of £135.

John Pears, UK Managing Director of Lowell UK said “At Lowell, we understand that with so many financial outgoings Christmas can be an expensive time for many people.

The cost-of-living crisis is having a huge impact on many households – and we fear this will get worse if people feel under pressure to overspend during the festive period.

Our report shows an increase in the number of people intending to use credit to fund Christmas. This can cause an increase in household debt that can become difficult to manage.