I know I can’t believe I’ve brought up Christmas and it’s only October, but when we spend millions on gifts every single year, preparation is key. The effects of the difficult financial climate and the squeeze on the government’s purse are starting to take their toll as 39% of people plan to spend less money this Christmas.

In addition, figures from ICM Research suggest that more people are shopping online, with 73% of people claiming that they will buy the same amount or more online than they did last Christmas. A possible cause could be that the threat of bad winter weather has forced us online and away from the high street but it is more likely to be because there are significant savings to be made on the web.

This increase in online shopping means that more people are turning to plastic to pay for their goods. Therefore, consumers need to be wary and prepared because too much spending on credit cards can easily turn into a post-Christmas debt hangover.

Prepaid cards are the ideal alternative form of plastic because they can help keep you within your Christmas budget and avoid credit card debts. While it’s not a bad idea to shop with credit cards, particularly if you have plans to earn rewards and pay off the full outstanding balance immediately, this can easily turn into a bad habit, which will ultimately lead to bad debt, if you don’t have the necessary discipline.

The prepaid card market has expanded considerably in recent years and there is now a multitude of cards available all of which come with different advantages and disadvantages. The main two ways that a prepaid card could help at Christmas are with budgeting and online shopping.

Online Christmas shopping

As we have seen in the research from ICM, the number of people who are shopping online is on the rise, and is thought to continue to rise for the foreseeable future as we turn into an internet-addicted generation.

Prepaid cards are not usually linked to personal information or a bank account which means that people with no access to bank accounts or those that have bad credit are still able to shop online. Usually if you don’t have a debit or credit card you are restricted to physically paying with cash at the store, especially as the number of outlets accepting cheques is also diminishing.

Although there are no credit facilities with a prepaid card and all the available funds are pre-loaded, it opens up a new avenue for people wanting to shop online because prepaid cards are issued by companies such as MasterCard and Visa, which means they are accepted on the same sites as most debit and credit cards.

Budgeting Christmas spending

Budgeting is essential for the Christmas period; stocking fillers, selection boxes, the turkey, travel costs, decorations, gifts, cards, parties and everything else all add up.

Prepaid cards can benefit all Christmas shoppers, and not only those that choose to shop online, because they can help everyone budget for their Christmas spends. Prepaid card users can keep track of the money they are spending by using an online service provided by the card issuer, similar to an online bank statement.

Parents will be feeling the increasing financial pressures as kids expectations get higher and the cost of living increases, so how can prepaid cards help? If money is tight this Christmas, work out your spending budget, load it on to the card to make your purchases and get yourself into the mindset that once the money on the card is gone, there’s no more to spend. In a way it is similar to paying for your credit card before you even use it. Once you have spent the loaded funds, you can easily reload the card online, by mobile phone, in-store or over the phone, should you discover that you have a bit of extra money to spend (you could free up some extra cash between now and Christmas by trying to cut your household bills, for example by switching gas and electric providers).

Prepare for next Christmas

If you are extremely organised and have already sorted this Christmas, it’s not too early to start thinking about the next one. By setting aside a certain amount of your wages each month and loading it on to your prepaid card, you could have a large chunk of your budget ready for spending on the card by the time we get to October or November 2012

Prepaid cards are not the only way to budget for Christmas but they can avoid a debt hangover in the early New Year. Avoid struggling with mounting debt in January by using prepaid cards to budget for Christmas.