Count the cost of Christmas now

This month's interest rate rise - small though it may be - couldn't have come at a worse time for many people.

Christmas shopping is beginning in earnest and for a lot of consumers this is when they build up the debts they spend the next year paying off.

In fact, with spending and borrowing at record levels, the Bank of England's rate rise was a warning to consumers not to get carried away.

The expected spend this Christmas is £868 per person.

Overspend

That includes nearly £350 on presents - the rest goes on food, drink, decorations, cards and the like.

And perhaps the Bank of England has a point.

There's nothing more important than having a budget. Malcolm Hurlston, Consumer Credit Counselling Service

Research for Royal London suggests 25% of people go over budget and more than 50% feel under pressure to overspend.

Other surveys have found that 25% of people stick Christmas on their credit cards, while 19% don't bother to make a budget.

"There's nothing more important than having a budget," stresses Malcolm Hurlston of the Consumer Credit Counselling Service.

Inventive

"You don't always have to give people expensive presents. You have to be inventive - spend time, spend effort, but don't always spend money.

Presents don't have to be pricey

"It might be going for a run with them in the morning, something they have always wanted to do but haven't had the personal courage."

Certainly, using plastic might be a convenient way to pay for Christmas, but it's not always the most effective.

Some experts recommend a personal loan or authorised overdraft, which can be a good deal cheaper than most credit card interest rates.

Cheapest

At the very least, they suggest, avoid store cards with their high rates and use the cheapest card possible.

Research by Egg shows that in January alone, shoppers pay a total of £21m in interest for their Christmas spending.

"Credit cards are very good as long as you think you can see your way to getting back on track by February at the latest," says Malcolm.

"Otherwise the costs mount up rather badly."

One way to avoid huge interest charges is to take advantage of offers which allow you to transfer your balance at 0% interest for six months.

Among those cards currently offering this facility are:

RBS Advanta

Smile

Nationwide BS Classic

Virgin Credit Card Option 1

Egg card

Citi Classic Plus Card.

But beware - while your transferred balance doesn't incur interest, any new transactions will.

Details correct at 13 November 2003.