Families facing a ‘cut-back Christmas’ as they spend less but borrow more, research shows

Cost-of-living pressures mean more people will borrow money this month to fund the festive celebrations, according to research commissioned by the Competition and Consumer Protection Commission (CCPC).

High levels of inflation mean a “cut-back Christmas” is in prospect for many this year. Almost a third of consumers expect to borrow some of the money they need to finance the festivities. This is up from a quarter of consumers last year.

Households are set to resort to credit cards, loans from banks and credit unions, in-store credit, buy-now-pay-later arrangements, and moneylender loans, the research found.

However, 73pc of those who responded to the survey, carried out by Ipsos B&A, said they intend to use their savings to pay for their Christmas.

The survey also revealed that consumers significantly underestimate how long their consumer rights last after purchase.

On average, consumers expect to spend almost €1,030, with around one in four expecting to spend at least €1,250.

Average spending is down €156 per consumer on last year, the CCPC said.

Inflation was mostly cited for the plans to cut back on spending. The sharpest decline is expected in households with children – down €221 on average from last year.

Just one in seven consumers expect to spend over €2,000 this Christmas.

CCPC director of communications Grainne Griffin said: “At this time of year, it’s easy to feel pressured into making snap decisions around borrowing, whether it’s putting the groceries on your credit card or choosing buy-now-pay-later at the checkout.

“Don’t ruin your January in search of the perfect Christmas – know the full cost of credit before you buy, and only borrow what you’ll be able to repay.”

The research also revealed some confusion about consumer rights, with just 1pc of all consumers surveyed correctly identifying the timeframe for return of faulty goods as six years.

More than half mistakenly believed it to be dependent on the warranty or guarantee.

Ms Griffin said: “However much you’re planning to spend this Christmas, make sure you know your rights as a consumer.

“Your rights are independent of any warranty or guarantee – and they generally last much longer.”

She said that if something is faulty or not as advertised, the rights of consumers to a repair, replacement or refund are strongest in the first year after they get it, but they don’t just go away once that year is over.

The recent Credit Union Consumer Sentiment survey for November also found that many consumers are watching the pennies for this Christmas.

It found that more than half of consumers expect to have less to spend than last Christmas, while only one in 14 consumers say they have more to spend.

Author of the report, economist Austin Hughes, said this probably reflects a response to a sequence of negative shocks to spending capacity and accessibility over this period.

However, the responses for Christmas 2023 are less negative than last year when the full shock of the cost-of-living crisis was being felt in rapidly accelerating food and energy prices.