How to Pay Off Holiday Credit Card Debt NOW!
I used to hate the month of January. Well, specifically, I hated getting the mail during the first few weeks of January.
I knew the credit card statement was going to arrive any day and it was going to be time to pay the piper for the good time I had during the holidays.
And it was probably going to hurt.
But, in the years since I finally put systems around my money and got control over my finances, and after working with dozens of clients, I’ve developed a few strategies to help regain control of your debt after the holidays.
Here’s the first step:
Sit Down and Make a PLAN to Pay Off the Debt
I’ve found that ignoring the problem doesn’t make it better - I mean does it ever??
The first step to solving any problem is to step back and add up the damage. In our case, quite literally.
Take a deep breath (I’m over here metaphorically holding your hand!) and login to your credit cards, tally things up, and face the music.
It might not be as bad as you think!
The path to success is to take massive,
Select a Debt Payoff Method
Make a plan to pay it off. Accepting reality and making a plan is the first and best step towards starting to feel in control.
Making a plan is taking back your power over your debt, your emotions, and your actions. You’re putting yourself back in charge!
When it comes to how to pay off your debt, you have some choices. There are three debt payoff strategies that I’ve seen used with the most success by myself and my one-on-one coaching clients.
The three strategies I’ve seen used with the most success are:
In a nutshell, the Snowball method will work for you if you need “quick wins”. That is if you need to see at least a little bit of progress right away. This works best if you have a lot of small debts, like store cards, with small balances you can pay off right away…and do your happy dance! 💃
The Avalanche method is the strategy that makes the most sense mathematically. With this method, you concentrate on paying down the debt with the highest interest rate and the highest balance first. Then, moving on to the next and the next.
The Tornado method is all about the EMOTION the debt triggers in you. With this method, you don’t care about quick wins or math, you just want the debt GONE. With this method, you throw every available penny at the debt - with all the ferociousness of mother nature - so that you get it out of your life as quickly as possible! 🌪️ 🌪️ 🌪️
What if You Used a By Now, Pay Later Option?
In the last two years, Buy Now, Pay Later options as Affirm, AfterPay, and Klarna have exploded in growth. Largely due to the pandemic, consumers made more and more of their purchases online. As these purchases increased so did the use of Buy Now, Pay Later options.
If you aren’t familiar with them, Buy Now, Pay Later options are exactly what they sound like. You buy the item now and then pay it off over the course of a few weeks or a few months - without incurring any interest fees.
Well, as long as you don’t make any late payments.
One late payment and the whole thing comes crashing down on your head in the form of ginormous interest fees! The interest fees on a Buy Now, Pay Later purchase can run you as much as 30%!!
So, your Next Step is to make sure you know when those payments are and put them in your calendar. My suggestion in situations where a large fee might be incurred if the payment is made late is to try to make the payment a couple of days early, just to be on the safe side!
Did You Open Any Store Cards?
During the holidays, I saw some juicy discounts being offered when purchases were made through a store card. Some retailers were also given a little discount bump if you opened a store card. 👊
I love a deal as much as the next person, so let’s make sure you preserve those discounts by paying off those store cards right now! Yes. If you can, do it Right NOW.
(Just open another browser window, log in to the store and pay off that card. Then come back here, because we aren’t done yet!)
Look at you being the Boss of your Money! 🤑 🤑 🤑
The reason I recommend paying off your store card now is that most of the time, there’s only one or two purchases on a store card because you were trying to get the discount. So, the balance is typically pretty low and easy to pay off.
BUT, store cards typically have high-interest rates and exorbitant annual fees, so whenever possible, it’s always best to try to pay those off as quickly as possible and save yourself some money in the long run.
The next thing to do? CLOSE the CARD!
But, Wait - Won’t Closing a Credit Card Hurt My Credit?
Closing a credit card can potentially hurt your credit score slightly - but only in the short run. However, when it comes to store cards, and especially if the only reason you opened the card was to get a discount, it’s better to just close the card.
Don’t get sucked into the false argument that closing a card will hurt your credit score.
For one thing, when you opened that card over the holidays, that was a “hard pull” on your credit, so your credit score has already been affected. Additionally, if you overspent during the holidays, that also dinged your score.
Closing a card isn’t going to hurt it more at the moment, and won’t affect it hardly at all in the long run. Especially once you get those larger balances we talked about earlier paid off!
I wrote an entire blog on how and if and when closing a credit card will hurt your credit score. It’s called, funny enough, “Will Closing a Credit Card Hurt Your Credit” and you can find it HERE. 😁 😁 😁
Now that you’ve totaled up all your debts, you’ve made sure you know when those Buy Now, Pay Later dates are, and paid off and closed those store cards you don’t need - what’s next?
Yes, Start Saving NOW!
Right now is the PERFECT TIME to start a Vacation/Holiday Savings account for NEXT YEAR!
You just went through all of your purchases for this year, so you know exactly what you spent. All you have to do is take that amount and divide it by the number of times you get paid in a year and you know exactly how much to save each pay period.
For example, if you get paid weekly you would divide the amount by fifty-two, if you get paid every other week, you would divide the amount by twenty-six and if you get paid twice per month, you would divide the amount by twenty-four.
Just think next year you won’t have to put ANY holiday gifts, trips, wrapping paper, decorations, or holiday meals with friends on a credit card. You will have prepared!
Next year, all you’ll need to do is move that money over to your checking account. If you’re a credit card points person, you’ll put the charges on your credit card, sure - but you’ll pay it off right away. Saving your future self hundreds of dollars in interest!
That’s a holiday present I can’t wait to give my future self. 😁 🎉 💫
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**I am not a licensed financial advisor. I am a money expert and I offer education, tips, tricks, and my opinions around money. You should consult a professional who understands your needs and your financial situation in order to make the best decisions for you! Additionally, some links in this blog may be affiliate links, which means if you click the link and buy the product I may earn a small commission - at NO COST to You! It’s one of the ways I keep the lights on around here so TYIA! 😉
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