Racked Up Debt Over the Holidays? Here Are 4 Fast Ways to Pay It Off

Like an unwanted guest, holiday debt can stick around for a lot longer than you'd like. We're not talking about a few months, either. Among Americans who went into holiday debt in 2022, one in three were still paying it off in December of 2023.

That's what can happen if you only make minimum payments on your debt. And the longer your debt lingers, the longer it can affect your finances -- and the more it can cost you in interest. The good news is that there are several methods you can use to get that debt paid off much more quickly.

1. Consolidate your debt at a lower interest rate

Holiday debt often ends up spread out across several accounts. A Chase card, an American Express card, a few store payment plans, and so on. Debt consolidation is a good way to simplify your payments and save on interest in the process.

There are two popular debt consolidation options:

• Get a balance transfer credit card with a low intro APR: Many of the best balance transfer cards have a 0% intro APR on balances that are transferred over. You can bring over credit card balances, and sometimes other types of debt, and pay them down with no interest charges during your card's intro period.
• Borrow a debt consolidation loan: Use it to pay off all your debt, and you only need to make payments on the loan going forward. You won't get a 0% intro APR, but the rates on top debt consolidation loans tend to be lower than what you'd pay on most credit cards.

2. Do a no-spend challenge

No-spend challenges are when you limit yourself to spending only on the essentials for a certain period. You could do a no-spend weekend, week, or month. During that time, you can spend on what you need, such as groceries and utilities. You don't spend on non-essentials, such as going out to eat or buying concert tickets.

I wouldn't recommend doing this for longer than a month. It's hard to only spend on necessities, if you're following the rules and not stretching the definition of things you need. But when you're dealing with debt, a no-spend challenge could be worth trying. It's possible to save over $200 on a no-spend week. That's money you can use to get rid of your holiday debt.

3. Pay off accounts with higher interest rates first

If you have multiple accounts to pay off, there are several strategies you could use. Debt consolidation normally saves you the most. But you need to qualify for a balance transfer card or a loan, and that can be hard if you don't have a high credit score.

Another good option is the debt avalanche method. This is where you prioritize paying off accounts with higher interest rates. Here's how it works:

• Make minimum payments on all your debts. You need to stay current on them to avoid late fees and issues with your credit score.
• Put all your extra money toward your account with the highest interest rate. You can find the interest rates for all your accounts online.
• Once that account is paid off, move on to the account with the next-highest interest rate. Keep doing this until you've paid off all your balances.

Since you're paying off accounts based on their interest rates, you save the most money on interest this way.

A quick word of warning here: If you have any accounts with a promotional 0% interest rate, see if it's a deferred interest offer. With this type of offer, if you don't pay off your full balance within the allotted time, you're charged interest going back to the purchase date. Minimum payments often aren't enough to pay off the balance in time. In this case, check how much you need to pay per month to pay off the account within the promotional period.

4. Earn money on the side and put it toward your debt

All kinds of side hustles let you earn extra cash on top of your regular work. Here are some examples:

• Teach a skill you're proficient in online, such as speaking another language.
• Drive for a ride-hailing or delivery service.
• Rent out a spare room in your home on Airbnb.
• Work as a dog walker or a pet sitter.

By devoting a few hours each week to a side hustle, you could earn hundreds of dollars per month. And if you find something you enjoy, you may even decide to continue doing it after you pay off your debt.

The holidays are expensive, and lots of people go into debt around that time of year. Whether you have $400 in holiday debt or $4,000, start taking steps to aggressively pay it back, so it's not a thorn in your side any longer than necessary.