Christmas is a time of celebration and indulgence but for many the festive season can mean unpaid bills and escalating debt. SELENA O’DONNELL reports
FAILURE to budget for the most expensive time of year will see many families in financial difficulties come January – the same month that VAT rises from 17.5% to 20%.
In a recent study carried out on behalf of the Citizens Advice Bureau almost 19% of people in the North West don’t know what VAT stands for, let alone understand how to budget for the forthcoming rise.
Ray McCann, money advice supervisor at Ellesmere Port Citizens Advice Bureau, warns the consequences of overspending at Christmas can last far beyond the New Year celebrations.
“Generally at Christmas people put a lot on their credit cards,” said Ray.
“They get hauled along with the festive spirit. They get swept away with thinking that they have to have this.
“They are under immense pressure at this time of year, especially if they have children.
“They hate to think that their child will miss out an anything.
“Our advice is to think beyond Christmas to when the bills come through.
“One of our busiest times of year is February when the credit card bills appear and people realise they have overspent.”
Ray says that, despite the well- publicised pitfalls, people continue to be tempted by the offer of short- term, high-interest loans.
“We see a lot of clients on low wages or benefits who use doorstep lenders,” he said.
“Quite often people are approached by doorstep lenders at Christmas or birthdays, when people need that extra cash. These loans typically have a very high APR, somewhere in the region of 270%.
“So if you borrowed £300, over a year you would pay back £546.
“And then there are wonga loans, which are around 2000% APR.
“People see these loans and don’t understand APR or don’t think about it. They just think ‘I need the money, so I’ll go with them’.
“Also if they already have a bad credit rating they may struggle to find credit anywhere else.
“In that situation we would advise people to contact The Credit Union.”
Once in grip of escalating debt, many individuals fail to address their problems, hoping instead that their financial woes will resolve itself.
Ray added: “It’s common for people to bury their heads in the sand, hoping for it to go away but it won’t – it will only get worse if you don’t speak to someone about it straight away.
“In general, financial companies are better than they have ever been about trying to help people in difficulties.
“But people must be wary of debt companies that cold-call people offering to consolidate debts for an initial payment.
“It’s much better for them to contact us or the National Debt Line.
“There is help out there but people need to seek it.”