New year bill leaves Brits in £4.1 billion of debt, with 40% unsure how they’ll pay it back
Our research has shone a light on the new year debts faced by many Brits. With many of us heading into the new year with a festive debt hanging over us, it can be easy to feel pessimistic about finances. But there are positive actions we can all take to get our finances back on track.
While lockdowns and social restrictions did mean a lucky few were able to put more money to one side in 2020 due to a reduction in their outgoings, not everyone was as fortunate. Our research suggests this wasn’t the case for everyone.
In fact, just over a third of UK adults (36%) accumulated an average new year debt of £220 on Christmas spending alone. And, for those who used credit cards to finance their spend, the average debt held is higher (£315).
While some people did have some ideas on how they could pay back their festive debt (savings, overdraft or seeking help from family and friends), 43% of people are still feeling pessimistic about their finances for 2021.
But it’s not all bad news. There are actions people can begin to take to prepare for whatever 2021 throws at us.
Anyone currently carrying debt, whether on a credit card or personal loan, should consider using any extra cash to pay off their debt sooner, and avoid building further interest. This could be done by paying off the balance in full or increasing your monthly payments.
Those whose savings do not cover the entire debt should instead focus their attention on the most expensive debt first: the credit cards or loans with the highest interest rates. While those with low interest or 0% balance transfer products might be tempted to spend or save the cash, repaying any debts sooner - and ideally within the Balance Transfer offer window - could help avoid further financial pain down the road.
To those who are planning on using their overdraft to clear their debts, you should look into the amount of interest you are charged or the fees associated with using your overdraft. Last year, overdrafts underwent a drastic change - they became much more expensive.
Most banks are now charging between 35% - 40% for agreed overdrafts. This is likely a much more expensive form of lending than your current credit card.
For more information on clearing your festive debts take a look at our article Have a plan to pay back your festive debt!.
If you’re looking for a 0% balance transfer credit card to consolidate your debts, or to reduce the interest you’re paying why not take advantage of our comparison service?
Research was carried out online by Opinium between 22nd to 29th December 2020, amongst a sample of 2,000 UK adults aged 18+, weighted to nationally representative criteria. £4.1 billion was derived by multiplying those who have accumulated debt over Christmas (711 /2,000) by the total UK adult population (52,673,000) then multiplying this by the debt they accumulated (£219) = £4.1billion