Americans have largely tried to shake off the holiday season and seem focused on a clean slate in 2023.
There’s one problem with this view: This slate isn’t really clean until the holiday debt is paid off, and for many families, that debt isn’t going away anytime soon.
Figure A is new data showing that, on average, more than a third (35%) of adults in the United States took on $1,549 in credit card debt in the last few months of 2022. This data is included in The latest holiday debt survey from Lending Treeis expected to take five months, on average, to be repaid.
“There’s no good time to take on debt,” the Lending Tree study noted, “but it’s a particularly bad time when interest rates are at record highs.”
Cut your holiday debt load down to size
All is not lost for people who have accumulated holiday spending debt. With some budget discipline and the creativity of household income, there’s no reason why consumers can’t cut that debt before five months are up.
Use these tips from personal finance experts to pay off your vacation debt sooner rather than later.
Calculate and plan. Start by calculating how much you owe across all of your family finance accounts, noting minimum payments due and interest rates to determine the best payment plan.
Choose from the “avalanche method,” where you pay off the card with the highest interest rate first to save on fees; or the “snowball method,” which focuses on paying off the smallest balance first to build momentum and motivate you. Andrea Woroch, a nationally recognized consumer finance expert. “A debt repayment app like Debt Free can walk you through the process.”
Rebalance your budget. Cut wasteful spending out of your budget so that you can make larger debt payments each month.
“Start by examining the monthly bills for services you don’t need or use and compare prices with competitors to see if switching will provide savings,” advise and Roach.
“for example, A recent study It found that 90% of mobile users waste their money on unlimited and unnecessary data plans. You can save a lot by switching to a lower-tier plan or moving to a cheaper internet-only carrier like Mint Mobile that has plans for as little as $15 a month.”
And Roach added that canceling unused subscriptions, bundling insurance policies, increasing deductibles, and separating unused items are other ways to reduce monthly spending.
Call your credit card company and ask for an annual percentage reduction. Believe it or not, if you do this, there is a good chance that you will be approved.
Leslie Tain, founder and personal finance expert at Tyne Legal Group.
Go to zero balance. If your credit is in good shape, consider taking advantage of our 0% APR balance transfer offer.
“This allows you to consolidate your high-interest credit card debt by rolling it over to a new card with a temporary 0% APR,” said Tayne. “This way, 100% of your payments are directed to the principal balance during this introductory period, which could last anywhere from six to 18 months.”
The key is to pay off the balance before the application period ends. “You want to avoid taking on any new debt,” Tain added. “It takes some discipline, but it can help you pay off your debt more aggressively.”
Take advantage of your tax refund. If you ran into debt over the holidays and are anticipating a refund this tax season, consider putting some or all of your refund toward debt repayment.
“It will help you jump-start your debt repayment strategy and can help limit the amount of interest you accrue,” said Courtney Aleffe, consumer financial advocate at Credit Karma.
Don’t forget to return your vacation. Achieving returns often falls on the shoulders of bottom On most people’s to-do lists.
“Don’t let this happen this holiday season,” Elif said. “Instead, be sure to return any gifts you don’t end up giving or no longer want and use that extra money to save and/or pay down debt. Remember: If you wait too long, you may miss the return period, which can result in lost savings.” .
Contact your lender. If you can’t make your bill payments, contact your lender to find out how to put together a payment plan that works for you.
“While help is not guaranteed, most lenders want to retain their customers and will often work with you to find a solution,” noted Alif. The worst thing they can say is, “No.”
Make a plan for the upcoming holiday season. It may seem crazy to plan an event a year from now, but getting ready for the upcoming holiday shopping season is a great idea.
“That should mean setting aside money each month in a high-yield savings account or simply choosing to do most of your shopping throughout the year so you don’t spend it all at once,” Elif added. “Doing so can save you a lot of stress, and money, this upcoming holiday season.”
Remember, it is never too early to make a financial plan.