Holiday Spending Catches Up With Britons As Many Resort To Expensive Payday Loans

• Around 33% of Britons say they may have spent more than their affordability over the holiday season.
• Many are now considering opting for expensive credit options to cover everyday expenses.
• Access to short-term credit has become limited due to stricter rules governing credit card debt in the UK.

The exorbitant spending of Christmas holidays was bound to catch up with Britons at some point and, for many, that cut-off date was set on January 22nd. According to a survey that has been conducted with over 2,000 British people, around 33% have responded by accepting that their Christmas spending was not justified considering their income.

On average, many people responded by saying that their income for this month would be fully spent by the 22nd of January since they had carried forward expenses incurred over the holidays.

Around 25% of survey respondents said that their plan to cover expenses for the rest of January was to enroll in buy now, pay later services, while a little over 14% said they would be subscribing to payday loans to make ends meet. These payday loans are expected to carry an amount of £624, on average, and, according to the respondents considering this option, it would take them approximately three months to fully repay them.

Such dire financial circumstances come at a time when banks have already asked their customers to increase their credit card repayments or risk having their cards blocked, especially those customers that have maintained long-standing debt on their credit cards. These changes in the rules are meant to offer relief to those who are paying more interest and fees on their loans than the initial amount they had borrowed.

However, criticism has been raised by campaigners about the inconsistency of the communication that has been delivered to credit card users. According to them, customers are receiving unexpected requests to make larger repayments, many at a time when they already find themselves in dire financial circumstances.

The new changes had been introduced by the FCA back in 2018, which directed all credit card lenders to highlight customers that have been in persistent debt. A timeline of 18 months was set, during which lenders were advised to encourage their customers with persistent credit card debt to reduce their outstanding balances below a specific threshold.

This timeline is due to expire in a month’s time for many people, which means their credit card debt could either be converted into a payment plan, or they could be given more unfavorable options.

According to experts, instead of seeking quick financial fixes such as payday loans, a better, long-term solution would be to budget properly and control expenses as much as possible. Perhaps shifting all debt into a balance transfer card that carries a 0% rate could also be a great option to consider, although such cards might be difficult to find at this time, considering the new rules. According to reports, there has been a reduction of over 33% during the previous 3 years in the number of cards that had the option of a balance transfer.