Christmas was a success. The only thing left is figuring out how to pay off holiday credit card debt. Little Jimmy got that video game you thought was silly, Aunt Myra was delighted with her new crochet hooks, and Amazon enjoyed a banner year with 502.19 billion dollars in revenue. You helped make all of this happen, and guess what? Your Visa bill just arrived in the mail, and they expect you to pay it, moneybags since you swiped that thing this Christmas like it was going out of style. 

Pay Off Holiday Credit Card Debt

Because of the excitement of the holidays, the pressure to keep up with the Jones, and the subconscious desire to buy love and affection with gifts, it is easy to go above your budget. Now it’s time to pay the piper. But if comparing your paltry earnings with your exorbitant spending causes your sphincter muscles to quiver, you’re not alone. The average holiday debt among Americans in 2021 was $1,249, and according to U.S. News, two in five people expected to go into debt paying for gifts with high-interest credit cards during Christmastime. 

Pay It Off Quickly

Reducing the debt and paying it off as quickly as possible will save you a great deal of money in interest and fees. The longer you carry the debt, the more interest will accrue, and the deeper in debt you will fall. Consider a credit card of $1,500 with an interest rate of 22% (the average rate in the U.S. as of this writing). Your minimum payment is $43.00 a month. If you only pay that minimum payment each month, it will take you 57 months to pay off, and you’ll end up paying $2,415. So, four Christmases later, you’ll still be paying off debt from Christmas 2022; that is not a sustainable plan.

It is essential to pay off as quickly as possible to avoid the adverse effects of interest and the depressing realization that little Jimmy had already broken that video game that you still owe money on. Start by gathering together all of your bills for the months ahead. Make an Excel spreadsheet that shows the money going out and the money coming in. If you have no reliable way of boosting your income, even temporarily, you’ve got to make a plan, and it starts with your spending. 

Sacrifice Your Lifestyle

Paying off debt is as easy as employing simple math. You make X. You spend Y. Your monthly payments for your debt is Z. If Y plus Z is more than X, you’re in trouble, and you have to reduce X. This means you have to adjust your caviar lifestyle to a liverwurst reality. This means sacrifice. Skip the daily Starbucks. Put your gym membership on hold (thanks to new year’s resolutions, they’re crowded anyways). Cut down on your nightlife activities with friends. Cook meals at home. Buy store-brand groceries. Dump your Disney+ subscription. 

Ask yourself these questions: 

• What services or monthly subscriptions can I cancel or suspend (Amazon, Spotify, Netflix, FabFitFun, Loot Crate, Blue Apron, etc.)?

• What’s the biggest expense I can skip for a few months (alcohol, smoking, gym, restaurants, etc.)?

• Can I shop around for better deals?

• Could I have avoided this expense?

• Is this expensive thing really necessary?

Take a hard look at the money you spend, and pay close attention to hidden expenses you make every month without even knowing it. Call all of your utilities and try to get a reduction in your fees. Your phone company and internet provider can offer a reduced rate or a change in your package that will save you some money. Contact your credit card companies and ask for a reduction in the interest rate. Some are helpful in that they offer hardship programs if you ask. 

Snowball and Avalanche Methods

If you’re stuck with multiple credit cards that need to be paid each month, there are three ways to organize them to better use your money in getting the balances paid off. When employing any of these methods, let your lender know that any extra money paid should go to paying down the principal. A cheap ploy by them is to hold the additional funds as a credit toward future payments, which won’t reduce your debt any faster or save you any money. 

Lowest Balance: If planning isn’t your strong suit and sticking to a difficult scheme doesn’t last too long, consider paying off the cards with the lowest balance first. This will give you a psychological boost to believe that you are making progress, and you are, but just not as efficiently as you can. 

Snowball Method:

1. Organize your credit cards with the highest balance first.
2. Pay the minimum on the remaining cards, but pay as much extra as possible on the card with the highest balance.
3. Once that is paid off, take your payment on the highest balance card and apply it to the next highest while still paying the minimum on the rest.
4. Keep doing this as you slowly knock out cards down the line. 

Avalanche Method: Similar to the Snowball Method, but much more effective at erasing debt, it is to list your credit cards with the highest interest rate first (also include any fees in the calculation). As well the Snowball Method, pay the minimum balances on the other cards and pay extra on the one with the highest interest rate. Once that card is eliminated, take that payment and apply it to the next card. 

Balance Transfer Card

This seems like robbing Peter to pay Paul, but numerous financial institutions offer zero-interest credit cards for an introductory period of time. This is in the hopes that people open a line of credit and let it extend beyond that introductory period. 

If you have a solid game plan to reduce your spending and up your payments, a good idea might be to find a zero-interest card and transfer your balances to it. This is good for several reasons. 1) You will only have one credit card payment, which is psychologically encouraging; and 2) The zero balance will mean that your debt won’t grow any larger as you pay it off. 

There are a few precautions to take. For example, some cards have balance transfer fees, while others stipulate that all the interest accrued in that introductory period will be applied to the credit if not paid off on time. Check the introductory rate’s length and ensure it is long enough for you to pay off the balance.

Make Frequent Payments

You don’t have to wait until the bill comes each month to make a payment. Many cards accrue interest daily, so every dollar you pay down means one less dollar gaining interest. To do this, make more frequent payments instead of once a month, but make sure to pay more than your minimum monthly payment. Otherwise, you’ll garner late fees and make the situation worse. 

Get Professional Help

Some people have dug themselves into such a hole of debt that there’s no way out of it besides bankruptcy, foreclosing of property, and wage garnishing. Consider working with a credit card counselor to help discover all of your options to becoming debt free. They can better negotiate with credit card companies, organize your debt, and help you with budgeting and debt consolidation. 

How to Avoid It

It might be too late to pay off holiday credit card debt this year. But plan ahead for next year by taking a few extra steps to avoid accruing credit card debt. 

Step One: Don’t spend so much: It might be hard, but if the loved ones you are giving gifts to really love you, they will understand that last year’s Bulova watches for everyone were the previous year, and this year, it’s gift cards to Applebee’s. It’s corny, but remember that the spirit of Christmas is not presents but that you are present. When giving gifts, create a budget of X dollars per person, and don’t exceed that limit. 

Create an Honest Budget for the Year

You only have so much to work with monthly, and there’s no need to spend more than that just because you want the latest and greatest whatever comes your way. Make a brutal budget and stick to it. Bring a calculator to the grocery store. Say no when your friends ask you out for beers (or be the D.D. and don’t drink). If you spend your monthly allotment on entertainment, stay home for the rest of the month. 

Save Money for Christmas: Christmas isn’t a surprise. It’s been December 25 for 2,000 years, and it will likely be there this year too. Start saving now. Starting a savings account at your bank costs nothing, so you can put a set amount into it each month and leave it alone. Some banks have automatic transfers so that you can transfer two or three dollars daily, and you will notice it missing. Come late November. You’ll have nearly $1,000 for Christmas. 

An alternative is to buy one or two presents (with cash) each month until Christmastime. This way, you can search for deals, not feel the rush of Christmas stress to find the perfect gifts, and you’ll have Christmas shopping done early so you can relax for once this year. 

Use a Zero-Interest Card: If none of the previous tips are in your wheelhouse and you enjoy the soul-crushing feeling of drowning in debt, then at least get a zero-interest credit card around summertime, something with a 12-month introductory time. Spend what you need for Christmas and then begin paying it off for the rest of the year, ad infinitum. Of course, this way, you’ll always be in debt and likely never really happy if that’s your kink. 

Final Words on Debt

If you’re in debt, you’re not living a free life. You’re a slave. Working to pay companies for borrowing money you shouldn’t have. Those possessions you bought on credit that you are paying off over the years are possessing you. Those credit card companies are only getting rich because you let them by feeling the pressure to buy things you don’t need. Break the cycle. Use cash. Don’t live outside your means. In 10 years, nobody will remember that you gave knitting needles to Aunt Myra for Christmas. 

How do I know all of these things? Above my desk, as I write this, hangs an ornate picture frame containing 40 credit cards, all of them, at one point or another, maxed out, canceled, revived, maxed out again, and finally paid off and put under glass. On the frame’s backing, I wrote in 1998: “Never again.” And to this day, I have never had a revolving debt credit card. This can be you too.