The holidays might be over, but nobody told your credit cards.
A Magnify Money poll found Americans added an average of $986 in debt during this holiday season. That might not seem like a huge number – but let’s not forget those pesky interest rates and daily expenses. Consumers making the minimum $25 payment each month on a 15 percent rate credit card could rack up about $400 in interest.
They could also take almost 10 years to pay off that holiday debt. And what happens if they wrack up more holiday debt the next several years?
So, let’s try to avoid that nightmare after Christmas, shall we? Here are some solid tips for paying off your holiday debt as quickly as possible.
- Divide and Conquer. If you have multiple credit cards that’ve wracked up debt over the holiday season, it can be tempting to try to pay all of them off at once. But paying the same amount off each card every month will hurt you in the long run, said Kasey C. Gahler, a Texas-based certified financial planner in a CreditCards.com article. Instead, turn your focus toward the credit card with the highest interest rate. Ignore all other cards until that one is paid off, then move onto the next highest interest rate card. It’ll save you in interest rate payments.
- Pay Up – All Month Long. Most people don’t think about paying their credit card companies until they receive their statements. But credit card companies will take more than one payment a month, according Consumer Reports. Since interest is calculated from the account’s average daily balance, you’ll pay less over time if you send money throughout the month rather than only when you receive your statement. Consumer Reports recommends pairing this method with spending cuts. For instance, if you that $25 dinner out in favor of leftovers at home, immediately go online and pay that $25 off your credit card. You’ll be surprised how fast debt begins to dwindle.
- Cut it. Are there any small places you can cut spending in your budget to allow more money toward paying off debt? Maybe you can skip that daily Starbucks run. Consider spending less on big ticket items, too. A new year can be a great time to shop around for cheaper car insurance or to unsubscribe to services you never use any more (there may even be some you’ve forgotten about).
- Side Hustle. Cutting down spending is great, but there’s only so mucn you can reasonably cut out of your budget. To fill in gaps, consider trying to earn some extra money on the side. You could rent out your house on Airbnb or offer rides on Lyft and / or Uber. Sites like LinkedIn ProFinder and Upwork can help you find freelance jobs while Instacart, Postmates and TaskRabbit can make you some money doing chores and running errands.
- Plan Ahead. You’ve worked hard to get out of debt from Christmas 2017 – don’t make more work for yourself after Christmas 2018. Look at how much the holidays cost you this year and divide that amount by 12. Each month, put aside 1/12 that amount into a holidays saving account. That way you can stay debt free well into 2018! Happy New Year!