Published in: Credit Cards | Jan. 23, 2020
Racked Up Holiday Debt? 3 Ways to Pay It Off Quickly
By: Maurie Backman
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Sitting on a credit card balance following the holidays? Do these things so it doesn't drag on too long.
Now that the holidays are over, you're probably sitting on a pile of gifts -- and a lot more credit card debt, too. It's hard to avoid holiday debt when there's pressure to travel, buy presents, decorate, and entertain, all within roughly the same four-week time span. The average American spent about $882 on Christmas presents last year, according to The Ascent's recent survey on Americans' Christmas spending.
If you're closing out the holidays with debt, it's imperative that you knock it out quickly to avoid wasting money on interest charges. Here's how to get rid of that debt -- and avoid having it hurt your finances on a long-term basis.
1. Get on a tight budget
The more money you're able to free up on a monthly basis, the sooner you'll pay down your holiday debt. To that end, take a look at your budget -- or create one if you don't have a budget already -- and see where there's room to cut corners.
If you're paying $50 a month for a gym membership you rarely use, cancel it. If your cable bill costs $80 a month, see if cutting that cord and opting for cheaper streaming services instead saves you money. And if you typically dine out twice a week to the tune of $40 a pop, pledge to eat solely at home until your debt is done with.
2. Boost your income with a second job
If you really racked up a lot of debt this past holiday season, making modest cuts in your budget may not be enough to help you shed it quickly. If that’s the case, the next best solution could come in the form of a second job.
The gig economy is booming these days, which means it's fairly easy to find work on the side if you're willing to hustle. Best of all, it's not difficult to find a second gig that's flexible, whether it's doing web development or graphic design work from home, driving for a rideshare company, or caring for other people's homes, children, or pets when you have the time.
3. Make that debt more affordable
The lower the interest rate on your debt, the easier it'll be to eliminate. If you're carrying balances on a few high-interest-rate credit cards, it pays to look into a balance transfer. If you're able to move your debts onto a single credit card with a lower interest rate, you'll not only save some money, but also have an easier time managing your payments.
Some balance transfer cards even offer a 0% introductory interest rate, so if your credit score is good, it pays to apply. If a balance transfer isn't an option, you can consider consolidating your debt into a single loan with a lower interest rate than what your various credit cards are charging you -- but again, your ability to do so will hinge on your having decent credit.
The sooner you pay off your holiday debt, the less stress it will cause you. A $2,000 pile of debt will cost you around $233 in interest if it takes you a year to pay off and you're stuck with a 20% interest rate.
But if you manage to knock out that debt in six months, you'll pay just $118 in interest. That's a decent chunk of savings right there. Without a doubt, it pays to push yourself to get out of debt quickly.
However, at the same time, you should work on socking away some cash to tackle the next holiday season. Although it may be close to a year away, if you stash enough money in the bank, you won't find yourself in a repeat debt scenario next January.
Don't pay credit card interest until 2021
The Ascent just released a free credit card guide that could help you pay off credit card debt once and for all. Inside, you'll uncover a simple debt-cutting strategy that could save you $1,863 in interest charges paying off $10,000 of debt. Best yet, you can get started in just three minutes!