The warning comes as many Scots will be feeling the pinch following Christmas with credit card bills arriving on top of regular monthly payments, adding to increased financial stress.

Such financial pressures are often made worse at this time of year, with many Scots struggling to manage their money until January’s payday, which often isn’t until the end of the month.

As a result people throughout Scotland will be faced with the difficult decision to borrow money with many seeing payday loans as a quick fix to solve their festive debt. However, such creditors often charge interest rates of over 5,000 per cent APR. This is a huge figure when compared to credit unions, which are restricted by law to lending at a maximum of two per cent per month (26.8 per cent APR), with many offering lower preferential rates.

Fergus Ewing, Enterprise Minister, said: “After Christmas many people can find themselves in financial difficulty as the cost of the festive period mounts up and bills start to arrive. The Scottish Government is very concerned about the growth of payday lending and the impact this is having on people in Scotland, especially on people who are struggling financially as a result of the Christmas period.

“January is traditionally a tough month, and we want people in Scotland to be aware that there are other options if they are struggling financially. Credit unions are available to people throughout Scotland and offer a range of loan products at manageable rates of interest and affordable repayment options, many within a short timescale.” Recent figures from charity Step Change found that Scotland has the highest volume of payday lending in the UK; with almost one in five clients at the charity having at least one payday loan. With over 100 credit unions throughout Scotland, everybody has access to ethical, affordable credit and should consider them when looking at their financial options.

Allison Barnes, Scotland manager at Money Advice Service, said:“From our annual Christmas survey, we know that one third (35 per cent) of adults in Scotland will pay for the festivities using credit cards and six per cent admit they plan to turn to payday loans to cover the cost of Christmas.

“Payday loans are one way of getting cash fast but they do come with risks.

“No one should borrow from a payday lender unless they are 100% confident they can repay the cash on time.

“This is why we are supporting the Scottish Government’s 12 Days of Debtmas campaign which is encouraging people to look at alternatives to payday loans along with the benefits of saving with a Credit Union.” In addition to preferential rates of interest and fairer terms, credit unions also work with their members offering greater levels of financial support, including helping them to set affordable repayment terms.

This allows borrowers to pay off their loan over a longer time, ensuring they don’t get into greater financial difficultly from stringent repayment terms, which often result in people having to rollover payday debts, incurring more debt.

Over 300,000 people in Scotland are members of a credit union, with recent figures showing that almost 400 new members join a Scottish credit union each week. Often misconceived as the poor man’s bank, credit unions offer a range of financial services including, savings accounts, current accounts, pre-paid debit accounts and even mortgages, which are regulated by the Financial Conduct Authority and Prudential Regulation Authority. They also help members to get into the habit of saving, encouraging them to put money aside regularly, even small amounts, helping them to better manage their finances throughout the year.