Still Stuck With Holiday Debt? 5 Fast Ways to Pay It Off

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Don’t let that holiday debt stick around too long. 

The holidays often involve a lot of spending, and that means many people end up with holiday debt. One of the most common types of holiday debt is credit card balances, which are especially hard on your finances given their high interest rates.

Holiday debt isn’t something to feel bad about, but you should make paying it off a priority. You definitely don’t want to go into the next holiday season still paying off last year’s debt, and this is more common than you might think. During the 2022 holiday season, 10% of consumers had leftover debt from the 2021 holidays!

Statistics like that are a perfect example of why it’s important to prioritize holiday debt. Fortunately, there are several ways to get that debt paid off more quickly.

1. Move it to a balance transfer credit card

A great way to save on holiday debt and make it easier to pay off is debt consolidation. That’s when you get a new loan or line of credit and use it to pay all your debts and get a break on interest. And one of the best debt consolidation options, if you have a high credit score, is a balance transfer credit card.

This type of credit card lets you bring over balances from other credit cards. Depending on the balance transfer card, you may also be able to bring over loan balances.

Here’s the best part — the top balance transfer credit cards offer a 0% intro APR on those balance transfers. After you transfer over balances, you pay no interest on them for the entire intro period. The length of the intro period depends on the card, but many offer 12 months or longer. Most of these cards charge a balance transfer fee, with the standard amount being 3%.

2. Refinance it with a debt consolidation loan

Another way to consolidate holiday debt is with debt consolidation loans. These are personal loans designed for paying off debt.

You aren’t going to get a 0% APR with these, but you can qualify for competitive interest rates if your credit score is high enough. Loan interest rates at least tend to be much lower than credit card interest rates. Plus, debt consolidation loans have fixed payment amounts and terms. For consumers who find it hard to stay on track when paying off credit cards, the structure of a loan could help.

3. Use the debt avalanche method

If you don’t want to consolidate your debt, or your credit score isn’t high enough to do it, then your next-best option is the debt avalanche method. This is a debt repayment method where you focus on your debt with the highest interest rate first.

Here’s how to do it:

Check the interest rates for all your debts. You can find this information in your online account or by calling the creditor.Make the minimum payments, every month, on those accounts.Put all leftover money toward the debt with the highest interest rate.After paying off that debt, find the debt with the next highest interest rate, and repeat the process.

Since you tackle debts with higher interest rates first, it’s the most efficient way to pay off multiple accounts, excluding debt consolidation. You’ll save the most money and pay off everything in the shortest possible time.

4. Revamp your budget

The biggest factor in how quickly you pay off holiday debt is how much money you put toward it. That’s why it’s worth reviewing your spending to see if there are places you can cut back. Maybe you put streaming subscriptions on hold and switch to free streaming services for a few months, or you don’t go out for dinners and drinks as much. If you can free up $100, that’s $100 more in monthly debt payments.

That can make a big difference. Let’s say you have $2,000 in credit card balances at an 18% APR. Here’s how an extra $100 per month changes your credit card payoff timeline:

If you pay $200 per month, it would take 11 months and cost you $183 in interest.If you pay $300 per month, it would take seven months and cost you $123 in interest.

5. Start earning some extra cash

You could also put more toward holiday debt by boosting your income. One of the quickest and simplest ways to do this is by starting a side hustle. There are plenty of profitable side hustles you could do on your own time to bring in extra money every month.

That’s just one option. You might consider asking for a raise, especially if you’ve been doing well at your job and haven’t gotten a pay increase recently. Looking for ways to increase your income is a good habit to get into, regardless, and it will continue to benefit you after your holiday debt is paid off.

Holiday debt doesn’t need to stick around the whole year. If you start using some of those repayment strategies, you’ll be well on your way to getting free of debt.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Avalanche. The Motley Fool has a disclosure policy.

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