Almost 10 million UK consumers will take on debt to cover the cost Christmas, according to new research by MoneySupermarket.com.
In fact, just 57% of the adult population has saved up enough money for Christmas to avoid borrowing. That's 6% lower than the number of people that saved enough this time last year.
What's more, with 40% of Britons already shouldering unsecured debts such as credit card balances and personal loans, any further borrowing done over the festive season will only serve to increase the burden.
Of those already in debt, more than a third - or 36% - expect Christmas to push them even further into the red. Another fifth plans to use their December salaries to pay for Christmas - leaving them with little left over to meet their current debt repayments.
Tim Moss, head of loans and debt at MoneySupermarket.com, said: "This year has been incredibly tough for consumers, with the rising cost of living really hitting the nation's wallets hard.
"So really, it comes as no shock that such a high number of people will be taking on debt this festive season, particularly as Christmas is a time when people generally increase their spending."
I plan to fund Christmas using a credit card. Which one should I choose?
Of all those planning to take on debt this Christmas, a massive seven in 10 expect to put their festive bills on a credit card.
For these people, it is therefore vital to spend on a card that does not penalise them with sky-high interest rates that will add to the burden and keep them in the red for longer.
The best cards for this purpose are those offering 0% on purchases, and the most popular of these with MoneySupermarket.com users is currently the Marks & Spencer Credit Card.
It gives new customers an impressive 15 months at 0% on their purchases, after which the card has a representative annual percentage rate (APR) of 15.9% (variable).
Usefully for Christmas shoppers, the card also offers access to a rewards scheme that gives you one point for every £1 spent at M&S, and one point for every £2 spent elsewhere.
And once you have 100 points, you get a £1 reward voucher to spend in M&S stores. For those who tend to shop at Tesco more than M&S, however, there is also the Tesco Clubcard Credit Card.
It too offers 15 months interest-free on purchases, as well as access to the supermarket chain's Clubcard scheme, and has a representative APR of 16.9% (variable).
For those with debts already built up on a credit card, meanwhile, the Halifax All In One card, which gives new customers 15 months at 0% on both balance transfers and purchases, could well be a better choice.
The only potential disadvantages are that it charges a slightly higher representative APR of 17.9% (variable) once the introductory period comes to an end, and imposes a balance transfer fee of 3% of any debts you move across.
Moss said: "For the large number of people who are unable to save, it is essential to pay as little interest on their Christmas debts as possible.
"A credit card offering an introductory rate of 0% on purchases might therefore be the sensible option - as long as they are able to pay off the balance in full within the interest-free period."
I would prefer to use my overdraft to cover the cost. Where can I find the best deals?
Of those not planning to spend on plastic this festive season, almost a quarter will use their overdraft facilities to take up the slack.
For these people, the most important thing is to arrange a borrowing facility before heading out on a festive spending spree and to stick within their authorised overdraft limits.
Otherwise, they risk being hit with penalty charges of up to £25 per unauthorised purchase, as well as interest rates of around 20%.
HSBC, for example, levies a penalty fee of £10 per item if the value of the transaction is between £10 and £25 and charges £25 per item on transactions worth more than £25.
Moss said: "Dipping into an unauthorised overdraft is likely to prove very costly, particularly as the penalty charges for dipping in the red without consent may not hit until January."
They could also save a packet by switching to a current account with an interest-free overdraft. The Santander Preferred Current Account, which is currently offering new customers a switching bonus of at least £100 cashback, charges 0% on arranged overdrafts for the first 12 months.
What's more, it pays a massive 5% on credit balances up to £2,500 for the first year too for those who manage to get back into the black quickly.
By Melanie Wright, financial journalist for moneysupermarket.com
