Debts & Loans

Deep anxiety over the approaching cost of Christmas, fears of redundancy and the recession are prompting unprecedented numbers of people to call debt charities for financial help.

Last week, 9,000 callers tried to contact the Consumer Credit Counselling Service (CCCS), its most frantic week so far, to deal with worries about the strain of Christmas on family budgets. National Debtline logged double the usual number of monthly calls to its advisers - 21,000 instead of around 10,000 - as families grappled with the problem of how to afford the festivities.

Frances Walker, spokeswoman for the CCCS, warns that the nature of much of the debt is changing too. 'Recent anecdotal evidence from callers suggests that people are using credit cards not to go on a big spend this Christmas but simply to plug the gap today - and that's a really troubling sign,' she says.

The costs of Christmas vary between households, but according to research from the Children's Mutual friendly society each child is set to receive an average of £316 in gifts and cash this year.

But it's not just those with youngsters who will be shelling out. Britons will fork out £604 on festivities such as decorations, going out, food and gifts, says a survey by lender Birmingham Midshires. While this is more than £100 less than last year's average spending, these are desperately large sums for families who are short of cash but face pressure to buy the latest toys and goods.

For many, the solution will be to plunge further into debt via expensive overdrafts, credit cards or pricey unsecured personal loans; worse, others will resort to doorstep lenders, loans secured against their home or - in the worst cases - loan sharks, whose effective annual percentage rate (APR) for borrowing can easily run well above 100 per cent.

However, debt advice charities have been at pains to point out to callers that there are much less painful ways to enjoy the festive season without resorting to these dangerous borrowing methods.

In fact, says the CCCS's Walker, bad economic news over the past few months can actually make it easier to rein in the purse strings: 'In a way, all the troubles of recession, redundancy and the credit crunch should make it a bit easier to say to your family, "Look, everybody's finding it tougher to afford things this year: we just don't have as much to spend".'

Blaming the economic climate is fine for adults, but not so simple when it comes to children. 'Our counsellors always hear parents say "I don't want to let the children down", but our advice is to explain that you can't afford every gift on their list. You'll be surprised at how much they'll understand,' Walker says.



Jane and Adam Johnston, from Bath, are contract workers in IT for banks and have had to abandon their earlier spending plans for the Christmas holiday week after the amount of shifts on offer began to dry up drastically three weeks ago. Where they had been expecting to work every day right up until 25 December, they will now only be on shift for a third of the anticipated working days.

'It's been really uncomfortable, but we decided to sit down with our 10-year-old daughter and explain that her Christmas will be very different this year, because we won't have as much for presents or to go away with friends,' says Jane. 'While we obviously didn't explain all the financial reasons, she still seemed perfectly happy to accept that we were having some money problems that would affect her; I was quite taken aback.'

'It's important to give them something on the day,' advises National Debtline spokeswoman Beccy Boden-Wilks. 'Ask them to draw up a list as normal, then promise to get them something off it.'

Five festive spending tips

Take advantage of retailers' desperation to sell and save splurging on big-ticket items until the new year sales. It might sound strange, but write out an 'IOU' and stick it in a Christmas card.

Now is the time to apply for a 0 per cent credit card to avoid interest payments over the festive period: Barclaycard Breathe has 12 months at 0 per cent, while both M&S and Halifax offer 10 months free of interest. If you pay off all your debts each month, you could even bag a reduction off every purchase by applying for an American Express Platinum Moneyback card that - for the first three months' spending - gives you 5 per cent cash back.

If you're already heavily in debt and don't qualify for cheap credit, your options are much more limited. It may sound boring, but a budget for all your spending - including food, decorations and socialising as well as presents - will help prevent you overreaching yourself.

Are you getting all the state help you're entitled to? It's easy to overlook your entitlements, so take a five-minute test to see what you qualify for at entitledto.co.uk.

Start saving for next Christmas. This might appear impossible right now, but if you can put aside as little as a £10 a week today, you'll be making a massive headstart on Christmas 2009.