Christmas on credit – the unwanted gift of debt

Like everyone else, Katrina wants all the trappings of Christmas for her and her five children. The tree’s up already, there’s a chocolate advent calendar for her baby granddaughter who also lives with her, and she’s starting to work out what the family will be eating over the holidays.

The problem is, living on benefits, Katrina, from Sheffield, can barely afford to run the house the rest of the year, let alone cope with the extra cost of Christmas. So, she will have to borrow the money, just as she did last year. And the year before.

One of the first things she will do with some of it, is give each of her five children £100 as a gift.

Debt is now as much a part of Katrina’s Christmas as the re-runs of Only Fools and Horses on the television.

Read more: Why didn't the recession curb personal debt?

She’s not alone. Seven million people will borrow to help them fund Christmas this year, with four million borrowing just to put food on the table.

For people like Katrina – who has exhausted most of the cheaper loan options – it means borrowing from some of the most pricey lenders, in her case the people who come offering cash to her door.

For every £100 she borrows she’ll pay back £160. She recognises it leaves her constantly chasing her tail but she feels there’s nothing she can do about it.

‘Vicious circle’

“Because I’m paying out too much weekly, I ain’t got it spare to save,” she explains. “Obviously I have got to get a loan so that is my money going down again to pay loans. It’s just a vicious circle.”

However, she bristles when I ask whether spending £500 she hasn’t got,on her children, is sensible?

“If it weren’t for these loans my kids would have nothing. I wouldn’t be able to afford it, and I don’t want that. I don’t want other children looking down their nose at them at school and saying ‘look at them, you ain’t got this and you ain’t got that’.”

According to a new survey carried out by consumer group Which?, 93 per cent of us feel under pressure to spend too much at Christmas. One in 10 of us is still paying off credit from spending on Christmas last year.

Under pressure

Richard and Amanda know exactly how that feels. Richard, 32, was a manager for a betting chain but had to give up work when his wife became ill two years ago.

They’ve increasingly had to rely on credit to get by – particularly at Christmas.

Last year they bought a PlayStation for their eight-year-old from the hire purchase company, Brighthouse, and have just finished paying it off.

Brighthouse offer the chance to pay back in weekly instalments with a minimum APR of 64.7 per cent. The PlayStation cost the couple – with insurance – more than £400. If they had the cash they could have bought one on the high street for £150.

But that’s a very big “if”. Richard is clear. He doesn’t have the money and Brighthouse offer him the chance to get things he needs and wants.

New home

The family are about to move into a new flat and it’s off to Brighthouse he goes for a cooker, a fridge and a new sofa suite.

The goods are worth £2,865. If he isn’t able to pay it back early, Richard will end up paying £5,402, a price which includes, Brighthouse are keen to point out, insurance and a customer care programme.

Does Richard feel it’s a fair price to pay?

“If you haven’t got any money and you can’t buy it there and then, what else can you do?”