3 Ways to Tackle Pesky Post-Holiday Credit Card Debt

3 Ways to Tackle Pesky Post-Holiday Credit Card Debt

January may come right after December, but these two months could not be more different. December tends to be a time of gift giving, indulgence, social engagements and splurging for the sake of the season. But January can feel very different; it’s more a time of new beginnings, resolutions and setting yourself up for the year ahead.

And, in the revealing light of January, the debts we accumulated during the holiday season can suddenly seem more urgent. After all, you want to start out the coming year with the strongest financial foundation possible.

Rather than getting down in the dumps about post-holiday credit card debt, take this as an opportunity to come up with a plan. Here are a few suggestions for how to think about it.

How Much Do Americans Spend Over the Holidays?

The results from Magnify Money’s annual holiday debt survey are in: Americans accumulated $1,325 on average in 2019.

It’s also worth noting:

• Nearly half (44 percent) of consumers took on at least some debt.
• More than half (58 percent) of consumers with holiday debt feel stressed about it.
• A majority (78 percent) of people with holiday debt will not be able to pay it off in January.

The takeaway? If you ever find yourself holding the bill for last holiday season and are unsure about how you’ll pay it off, rest assured you’re far from alone.

Tips for Tackling Post-Holiday Credit Card Debt

You’ll need a plan to truly tackle your post-holiday debt. Making minimum payments isn’t enough; this is how people remain in debt for years and end up paying hundreds or thousands of extra dollars in interest.

As debt expert and Freedom Debt Relief co-founder Andrew Housser notes for Markets Insider, “Uncontrolled holiday shopping can create debt problems that last for months or even years.”

Here are three proactive approaches to working down your debt, all worth considering.

• Stick to a Repayment Strategy

If you’re determined to pay off your debts on your own, pick a repayment strategy and stick to it rather than throwing money willy-nilly at all your debts.

The snowball and the avalanche are two popular examples. 

Rather than trying to pay as much as you can on each one, the snowball approach will have you make minimum payments on all but the smallest debt and apply the difference toward that one. Once it’s paid off, you focus all of that money, plus the minimum payment on the next smallest. Then go up the line in ascending order. This approach can help you rack up some motivation because you see results quickly.

The avalanche approach will have you prioritize accounts in the same fashion, but from highest interest to lowest, regardless of the balance size. This tactic aims to minimize how much you’ll pay in interest over the long term. 

• Consider Consolidation, Settlement or Management

Especially if you have holiday debt in addition to other outstanding balances, do-it-yourself repayment may not be enough. In this case, explore the ins and outs of these three methods:

• Consolidation: Take out a fixed-rate personal loan to pay off higher-interest debts.
• Settlement: Save up a percentage of what you owe, then negotiate with creditors in an attempt to resolve your debts for less.
• Management: Make payments through a credit counseling agency in exchange for lesser interest and fees.

Remember, there’s absolutely no shame in seeking out assistance through strategies like these.

• Create a New Spending Plan for the New Year

Racking up more debt while trying to figure out how to pay off last year’s balances is counterproductive. Dig into your budget, making adjustments to spending that’ll free up more money for debt repayment. A new year calls for a new — and better — spending plan.

Post-holiday credit card debt can linger like a guest who’s overstayed their welcome. You need a plan to take control of your finances for the new year and beyond.