Try These Cures for a Holiday-Spending Hangover

With the holidays in the rear-view mirror, holiday debt looms larger -- and closer -- than you think.

Americans have largely bid good riddance to the holiday season and seem focused on a clean slate in 2023.

There’s one problem with that outlook: That slate isn’t really clean until holiday debts are paid off, and for many households those debts aren't going away anytime soon.

Exhibit A is new data showing more than a third (35%) of U.S. adults took on an average of $1,549 in credit-card debt in the last few months of 2022. Those data, included in Lending Tree’s latest holiday debt survey, are expected to take an average of five months to pay off.

“There’s never a good time to carry debt, but this is a particularly bad time with interest rates at record highs,” the Lending Tree study noted.

Cutting the Holiday-Debt Burden Down to Size

All is not lost for people who’ve accumulated holiday-spending debt. With some budget discipline and household-income creativity, there’s no reason consumers can’t chop that debt to the nub well before five months are up.

Use these tips from personal-finance experts to get your holiday debt paid off sooner rather than later.

Calculate and plan. Start by calculating how much you owe across all your household finance accounts, noting minimum payments due and interest rates to determine the best repayment plan.

“Choose between the “Avalanche Method,” in which 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 keep you motivated,” said Andrea Woroch, a nationally recognized consumer-finance expert. “A debt-repayment app like Debt Free can guide you through this process.”

Rebalance your budget. Slash useless spending from your budget so you can make bigger debt payments each month.

“Begin by scrutinizing monthly bills for services you don’t need or use and compare rates with competitors to see if switching would provide savings,” Woroch advised.

“For instance, a recent study found that 90% of mobile users waste money on unnecessary unlimited data plans. You could save big by switching to a lower-tiered plan or move to a cheaper online-only carrier like Mint Mobile that has plans for as little as $15 a month.”

Canceling unused subscriptions, bundling insurance policies and increasing deductibles, and unplugging unused gadgets are other ways to reduce monthly spending, Woroch added.

Call your credit card company and ask for an APR reduction. Believe it or not, if you do this, there’s a good chance that you’ll be approved.

“That way, you can save money on interest, and more of your monthly payment will go toward the principal balance,” said Leslie Tayne, founder and personal-finance expert at Tayne Law Group.

Go zero balance. If your credit is in good shape, consider taking advantage of a 0% APR balance-transfer offer.

“This allows you to consolidate your high-interest credit card debt by transferring it to a new card with a temporary 0% APR,” Tayne said. “That way, 100% of your payments go toward the principal balance during this introductory period, which may last anywhere from six to 18 months.”

The key is to pay off the balance before the intro period is up. “You want to avoid taking on any new debt,” Tayne added. “It requires some discipline, but can help you pay off your debt more aggressively.”

Leverage your tax refund. If you've racked up debt during the holidays and you’re expecting a refund this tax season, consider putting a portion, or all, of your refund toward paying down debt.

“That will help you jump-start your debt-repayment strategy and could help limit the amount of interest you accrue,” said Courtney Alev, a Credit Karma consumer financial advocate.

Don’t forget to make your holiday returns. Making returns often falls to the bottom of most people’s to-do lists.

“Don’t let that happen this holiday season,” Alev said. “Instead, make sure to return any gifts you don't end up giving or no longer want and put that extra cash toward saving and/or paying down debt. Remember: If you wait too long, you may miss the return window, which could result in a loss of savings.”

Contact your lender. If you’re unable to make payments toward your bills, reach out to your lender to see about making a repayment plan that works for you.

“While help isn't guaranteed, most lenders want to keep their customers and will often work with you to look for a solution,” Alev noted. “The worst they can say is 'no.'”

Make a plan for the next holiday season. It might sound crazy to plan for an event one year from now, but preparing for the next holiday shopping season is a great idea.

“That should mean putting money away each month into a high-yield savings account or simply choosing to do most of your shopping throughout the year so you’re not spending all at once,” Alev added. “Doing so could save you a lot of stress, and money, this next holiday season.”

“Remember, it’s never too early to have a financial plan in place.”