How to pay off holiday spending quicker

How much do you spend on the holidays? The holiday season is a favorite time of year for many who enjoy giving gifts, celebrating and spending time with friends and family. But if you're feeling strapped for cash, you might struggle with the costs associated with the holidays. This season can quickly become very expensive when you total up the expenses from shopping for gifts, traveling to see loved ones and attending various events. It's easy to go over budget, which could lead to going into debt with holiday spending.

If you're in this situation, you're certainly not alone. A survey by LendingTree found 36% of U.S. consumers went into holiday debt, accruing $1,249 in holiday debt in 2021, much of which was on credit cards. While this spending doesn't become an immediate problem, it can quickly become one if paying off holiday spending isn't a priority. After all, many credit cards have high interest rates. If you accrued $1,000 in debt during December and made minimum payments, that spending could quickly balloon, requiring the payment of hundreds of extra dollars in interest. 

Tips for how to pay off holiday spending quicker

When you're struggling financially, getting ahead of your debt can feel impossible. But holiday season spending doesn't have to put you in a long-term hole. Use these tips when you're wondering how to pay off holiday spending quicker. 

Avoid using your credit card for a few months 

It's harder to pay down debt when you constantly accrue new debt on your credit card. If possible, avoid using your credit card for a couple of months to pay off the balance faster. Instead of paying for your essential expenses with a credit card, use cash or a debit card to stay within your budget.

Trim your spending

One of the best ways to pay off debt faster is to trim your spending in the months following the holiday season. Review your budget carefully to identify recurring charges or expenses you could cut back on or eliminate. Examples include entertainment streaming services, dining out and pricey memberships. Try to eliminate these costs, even just for a few months, and apply the extra money in your budget to your holiday debt.

You could also look into ways to earn extra income. Some people pick up additional jobs during the holidays, as many employers hire seasonal workers to accommodate the increase in demand. To avoid debt altogether, you could earn enough extra cash to pay off the credit card balance before it accrues interest. Gig work like providing transportation or delivery services could also help you earn money.

Redirect your savings habits

If you're working toward a savings goal, such as purchasing a home or a vehicle, consider temporarily redirecting that money to pay off your debt. Of course, you don't want to skip saving for too long, but doing so for a few months could help you avoid paying extra interest. Dedicate a portion of all income you receive to pay down your debt.

Transfer your balance

You might qualify for a lower-balance credit card or account that would allow you to pay the debt without incurring as much interest. Consider a balance transfer if you use a high-interest credit card and will face substantial costs if you cannot pay off the total amount immediately. Some card issuers allow customers to transfer their balances with a 0% interest rate for a set period, which could be up to 18 months. Be sure to look at any transfer fees when determining whether it's the right financial move for you.

If you are considering a balance transfer, it makes sense to assess all your debt and decide what to transfer. Review your credit card bills and account details to understand how much debt you have and what might qualify for a transfer. Moving your debt to a low- or zero-interest account could save you a lot of money over the long run.

Pay off high-interest debt first

Credit cards have the highest interest rates of all debt types, so it usually makes sense to pay those off first. Try to focus on what you can afford to put toward the balance on each credit account, paying off the cards with the highest interest rates immediately.

Tips to minimize holiday spending

You can also use a few helpful tips to keep your holiday spending under control this year before you start shopping for holiday gifts.

Stick to a budget

Before you start shopping, establish a budget for the holiday season. Include the amount you want to spend on gifts for friends and family members and any other expenses. Examples include travel costs, charitable giving and get-togethers. By creating a realistic budget, you can establish what you can reasonably afford to spend during this time of year and avoid going overboard on gifts.

Pay with cash 

It's easy to overspend when using a credit card or to purchase presents on a buy now, pay later system. After all, the money isn't leaving your account right then, so it doesn't cause as much of a financial strain. Using cash feels more natural, so pay for all your holiday gifts with money this year. You're less likely to blow your budget on a present you think you can't pass up. 

Consider alternate gift ideas

You don't have to go into debt to show your loved ones how much you care about them. If you lack the financial resource to buy gifts, look into alternate options. Make your gifts or give experiences that may cost less than physical presents. You could also talk to your loved ones about setting a lower spending limit to accommodate a lower budget for holiday gifts.

Choose a credit card wisely 

Credit card interest rates, benefits and fees vary widely, so making the right choice is essential. Simply applying for and using the first card you're pre-qualified for could cost you more in the long run. Instead, looking for a credit card that doesn't have an annual fee and includes various benefits is helpful. Depending on your financial situation and needs, choose a card that offers a percentage of all your purchases as cash back, gift cards, other physical rewards or travel benefits when you use the card.

Visa credit cards available through Alliant are worth considering. You can enjoy a highly beneficial credit card with no annual fee. Apply now and use the card for your holiday spending when you are ready to shop for gifts for friends and family.

Knowing how to pay off holiday season spending quicker can help you with being debt-free. You can use your extra income as you desire without worrying about the financial burden that comes when you feel bogged down by debt.

Learn about more budgeting and saving tips:

• How to use envelope budgeting with and without savings accounts 
• 5 benefits of having a savings account despite high inflation 
• Financial myths: Is using a credit card always bad?

Sources

• More Americans took on holiday debt this year, owing an average $1,249 (cnbc.com)