So, that was Christmas. The cheer may be dissipating, but what about the bills? With the average household spending an estimated €1,163 over the festive period, the financial hangover can rage well into the new year.
Almost one in five of us said we would borrow to cover Christmas costs, according to Competition and Consumer Protection Commission (CCPC) research. A fifth of us expected it to take at least three months to pay off the debt, said the representative sample of Irish adults.
If your festive spending has left you with the ick this January, it’s time to take control. And with a little forward planning, you can avoid the same mistakes next year.
How much did you spend?
Christmas was pricey, no matter your household type. Those without children anticipated spending least, according to the CCPC survey – but, at €995, that’s still a hefty chunk of change.
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For those aged 45-54, the sandwich generation, their expected spending was higher again, at €1,465. Households with children under 18, however, topped the Christmas spending table in Ireland. Their estimated spending was just over €1,600.
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While most of us, 57 per cent, anticipated spending “about the same” as we did in Christmas 2024, more than one in four said it would be “a little more” or “much more”.
Those in Dublin expected to spend a third more than they did for Christmas 2024. This compared to 23 per cent of those living outside Dublin.
Some 15 per cent of us said we would spend “a little less” or “much less” than in Christmas 2024.
Paying for it
So how did you pay for Christmas? Most of us were likely to use savings, according to the CCPC research. But, not surprisingly, higher-income households were 10 per cent more likely to do so than lower income households.
Almost one in five of us said we’d use some form of borrowing to cover the cost. This meant a bank or credit union loan, or potentially expensive credit card, overdraft or buy now, pay later credit.
Those aged 25-34 are the most likely age cohort to use buy now, pay later services.
Nearly half of those who anticipated having to borrow to pay for Christmas expected to borrow less than €500, although more than 1 in 10 expected to borrow €1,500 or more.
Unsurprisingly, higher-income households reported greater confidence levels in paying back their Christmas debts within a month, as did households without children.
For 29 per cent of us, settling Christmas spending will take more than a month but less than three months – so paying down our December debts could run into March.
Some 15 per cent of us may still be paying back festive spending between April and June.
Sort your credit card
If you put Christmas on the credit card, try to get on top of it now. Check your statement or ask your bank when payment is due, and try to clear the balance before then.
By paying it off in full before payment is due, you won’t be charged interest on your purchases – this is known as the “interest-free period” and is generally up to 56 days.
Clear the bill when you get it, or get as near to clearing it as you can, as soon as you can, says the Money Advice and Budgeting Service (MABS).
Even paying off part of your bill before the due date is better than paying nothing, but part payment still means charges. The bank will charge interest on any unpaid balance, and add that charge to your balance. If you don’t pay off that balance, you’ll pay interest on your interest.
For example, if your statement shows you owe €1,000 and you pay off €900 by the due date, you will be charged interest on the €100 that remains unpaid, and on any new purchases you make.
The amount of interest charged varies by credit card, ranging from 13 per cent to 26 per cent. This makes it an expensive way to pay for Christmas.
Miss a payment, or pay later than the due date, and there will be late payment fees, too.
Minimum payment?
Your credit card statement will show the minimum payment that must be made by the due date. Paying this can feel like you are keeping things under control, but you’re not.
Only paying the minimum each month – usually about 2 to 5 per cent – will cost you a lot in interest and it could take years to pay off a large balance.
Indeed, the minimum payment barely makes a dent in reducing the balance, especially when interest is added.
This time of year, paying the minimum can be a reality for many, but this is going to lead to very high interest charges and a longer time to pay it off.
If you’ve spent €1,000 on your credit card and the minimum payment is 5 per cent, or €20 a month, it will take seven years and 11 months to clear that €1,000.
Aim to clear the balance in full, or as near as possible to that, to avoid interest charges.
Buy now, pay later
If you used buy now, pay later services such as those from Klarna, Humm or Revolut for Christmas shopping, then get out your calendar.
In the case of Klarna, for example, if you have sufficient funds in your account to meet the instalments as they fall due at 30 and 60 days, you won’t pay any fees.
If you have insufficient funds, however, fees start to build up.
Should you miss the payment at 30 days, for example, you’ll get a few days’ grace to update your payment method or add sufficient funds in your account. If you can’t, then your loan is in default. You’ll be charged a late fee, linked to the value of purchase.
The full unpaid amount and charges will be rolled over to the next and final instalment – so on day 60, sometime in February if it was a Christmas purchase, your account will be charged the outstanding money, as well as the late fees.
You may be able to extend the due date of a repayment, but at another additional cost.
[ Beware the ghost of “Buy Now Pay Later” and have a savvy ChristmasOpens in new window ]
If payment is still a problem, Klarna will start debt collection procedures against you where you may have to pay “all reasonable costs” incurred by them and their debt collection agency.
So check your instalment dates and set a reminder in your phone to make sure there are sufficient funds in your account.
If you feel you are at risk of falling into arrears with a credit card or buy now, pay later provider, act sooner rather than later. Contact them without delay. They must work with you on a solution.
Alternatively, contact MABS, which can help you work on a solution with the provider.
Saving Christmas
Of those who save to cover Christmas, two in five set aside a little bit of money every month throughout the year, according to the CCPC research. A quarter start saving between July and September and a third between October and December.
However, higher-income households are more likely to save for Christmas earlier in the year, and consistently throughout the year, according to the research.
Putting €97 aside each month last year would have covered average household spending for Christmas just gone. But with cost of living increases, that wasn’t going to be possible for everyone.
Once you’ve cleared any debt hanging over from this Christmas, putting even a small amount aside each month can help avoid financial pressures next year.
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Tune into supermarket reward schemes now too. If you earn reward points through your usual supermarket shop, keeping them for Christmas can be a pain-free way to save. So, if you have a supermarket loyalty card, don’t forget to swipe it at the checkout every time, as the rewards may add up to some cheer later this year.
Some retailers such as Aldi and Lidl have launched savings cards enabling customers to save their deposit return scheme refunds to a store card. This enables you to keep all your refunds in one place. This can be a convenient way to save money towards future planned purchases rather than spending it on small discretionary items during the year.
Yes, committing your refunds to a retailer’s savings card locks you into spending the money with that retailer, but if it’s one you frequent anyway, it can be another way to save towards Christmas.
As the ghost of Christmas past fades, it’s worth asking whether the novelty gifts, crackers and excess food really added to the occasion – or just to the bill. Spending with more intention could be the difference between an easier Christmas next year and another costly one.
