How to Pay Down Holiday Credit Card Debt

By |2020-01-13T20:13:16+00:00January 13th, 2020|

If you went into debt shopping for the holidays, you’re probably not alone. Many American consumers plan to put at least some of their holiday spending on their credit card to pay off later.

But putting too much holiday debt on your credit card can be bad for your wallet and your credit. Large credit card balances can lead to larger payments, interest charges and even a lower credit score.

If you’re experiencing a holiday debt hangover, it’s time to dig yourself out. Here’s how to pay down holiday credit card debt and improve your financial outlook in the New Year.

1. Adjust Your Monthly Budget

Do you track your income and expenses with a monthly budget? It’s time to do some reallocation and find some extra funds to put toward your credit card bill. If you have enough discretionary income, you can simply reduce spending on unnecessary expenses like dining out and shopping trips and use that cash to pay extra on your credit card.

If your budget has less wiggle room, you may need to shift priorities around more. Maybe you can save a little less for a few months, or work on reducing your grocery bill until your card is paid off. The point is to find a little extra money in your budget and use that to put toward your credit card debt. Your unpaid debt will accrue interest, so it’s important to pay it off to save money in the long run.

If you can manage to find some extra funds in your budget, try to repeat that process month in and month out until your credit card balance is at $0.

2. Start a Side Hustle

If you can pick up a side hustle for a few months, the extra income can go a long way toward reducing your holiday debt. You can shovel snow, offer your talents on the freelance market, drive for a ridesharing service or sell unwanted stuff online. Your extra cash should be funneled directly to your credit card balance.

3. Open a Credit Card with a Balance Transfer Offer

Many credit card issuers offer new customers introductory interest rates for balance transfers, often as low as 0%. When you move all or part of an existing credit card balance onto the new card, you can use that low interest rate to pay off your debt faster.

You pay the introductory interest rate on any balance transfers you make for as long as the promotion lasts. For example, a credit card with a 0% APR on balance transfers for twelve months won’t accrue interest on the transfer for an entire year. It’s a good idea to pay off the balance transfer within the promotional period, or you’ll be hit with additional interest charges.

4. Stop Using Your Credit Card

It’s going to be difficult to pay off your holiday debt if you keep adding to it. You can temporarily stop using your credit card until you get your balance under control. This will help reduce your credit utilization ratio (which affects your credit score) and it will prevent your balance from spiraling out of control.

5. Use Unplanned Income to Pay Off Debt

Did you receive a bonus at work? Get some cash for your birthday or from a tax refund? Instead of splurging on something you want, put that unexpected income toward your debt.

6. Plan for Next Holiday Season

Once you’ve paid off your debt, start saving for the next holiday season. You’ll be able to use cash for your holiday purchases and avoid using your credit card as much. It’s easier to plan ahead and prevent debt than dig yourself out after the fact.