A couple holiday shopping
Debt Management

The holiday season is filled with festive decorations, big meals, and gift-giving. And it’s easy to go overboard with holiday spending, which can quickly pile up into holiday debt.

In 2022, consumers buying holiday gifts racked up substantial debt. A LendingTree report indicated the average person’s holiday debt was $1,549. And more than a third of survey respondents said it may take 5 months or more to pay down that debt. So, let’s look at a few ways you might tackle your holiday debt.

Best Egg Financial Health gives you resources to help you take control of your financial future. Keep track of your credit score with a comprehensive credit report. Check it as often as you like with no impact on your score. And our credit alerts will keep you on top of activities that could affect your score.

Ways to pay off holiday debt

There are some basic, time-tested ways to deal with holiday debt. Try one or more of these tactics to attack debts confidently.

Personal loan

A low-interest personal loan might make it easier and less expensive to pay off debt from holiday purchases. You could consolidate high-interest debt from multiple sources into a single, lower-interest loan. This allows you to structure your debt and set a budget—and could cost you less in the long run. You’ll have a single, fixed monthly payment and know exactly how long it will take to pay it off.

Holiday bonuses

Get a bonus from work this year? Many holiday bonuses come at a very tempting time and are quickly spent on something you “wanted,” like a new big-screen TV. Then your regular holiday spending kicks in, and you wind up with credit card debt. It may be a better idea to save your bonus money until after the holidays. Buy gifts for others first, then spend the remainder on yourself. And if you get a tax rebate or an unexpected windfall, use it to pay off debt or save it for next year.

Balance transfer credit card

If you’ve taken on more debt than you can pay off quickly, a 0% balance transfer credit card might help. These cards let you transfer debt to them and give you 18 months (sometimes less, sometimes more) to make payments while no interest is charged. That can be a great help to consumers stuck with a large balance on a high-interest-rate credit card. But remember: These cards usually charge an initial fee of 3% to 5% of the transferred amount. And the interest rates can go quite high if the card carries a balance after the grace period.

Ask for a lower credit card rate

Call your credit card company and ask for a lower interest rate. There’s no downside to this strategy—all they can do is say no. Having good credit may help your chances, but it’s worth the effort, no matter your credit score. If you strike out the first time, wait a few weeks and try again.

Sell stuff online

Almost everyone has things gathering dust in their attics, garages, or sheds. If you have old tools, bikes, furniture, lamps, etc.—list them for sale on eBay, Facebook Marketplace, and Craigslist. Whatever you end up selling provides extra money to pay down high-interest debt. Ten bucks here, 20 there—it all adds up, and it all helps. With this method, it’s like you get paid twice: once for the thing you sell and once when you eliminate credit card charges.

Pull in extra income

Can you get some overtime at work? Ask your boss. Look into a temporary side job to generate extra cash. Put the pay toward your debt and reduce the interest payments you make each month. After the debt is paid off, you might work a little longer at that side hustle and earn cash for future holiday expenses.

Revisit your budget

It’s a good idea to review your budget regularly. After the holiday season, take a close look at your budget and financial picture. Are the income and expense numbers still valid? Could you trim some expenses and put more toward paying down debt? Maybe cut out some entertainment or travel for a month or two? The sooner you pay off your debt, the less you’ll pay overall in interest charges.

Go on a spending fast

This might seem extreme to some, but it goes together with the tip above. You might avoid debt next year if you start cutting expenses now. Maybe drop some streaming services—keep only one active for a while. Eat at home more often and pack a lunch for work. Plan and combine errands, so you use less gas. Refrain from buying anything you don’t absolutely need. Don’t spend time online shopping or surfing merchant websites. It only encourages spending urges and impulse buys.

Use the snowball or avalanche method

These are two solid methods for attacking debt.

The avalanche method pays off the debt with the highest interest rate first while making minimum payments on everything else. Once the first debt is paid off, you focus on the one with the second-highest rate.

The snowball method pays off the smallest balance first while making minimum payments on other debts. Once that smallest debt is paid off, you tackle the next-smallest amount.

In both cases, you determine the total amount of your budget that you can apply toward debt. You add up the minimum monthly payments for all but the target debt and subtract the minimum payment amount from the total debt allocation. Then, you pay that amount toward the primary target. When that account is conquered, you transfer the amount you were paying toward that debt to the minimum amount you were paying on the new target account. In this way, you gain momentum and make bigger payments on your target accounts. Fans of the snowball method say it helps you stay motivated because you can pile up victories faster. However, both have proven track records.

Cut entertainment costs

Take advantage of free activities. Museums often have free days. Go on a group hike in a public park. Take a free class through a local school or community center. Many cities have public concerts and outdoor movies in the summer. Apply the money you save to your debt.

Get help

If your credit card balances far exceed your ability to repay in a timely and cost-efficient manner, seek help. Financial professionals could assist in finding the best solutions. Nonprofit credit counseling agencies can help you structure and negotiate debts. You may be able to establish a debt repayment plan with creditors and possibly reduce your interest rates.

Avoid holiday debt

One of your New Year’s resolutions could be to “avoid holiday debt next year.” The earlier you start, the better. There are many ways to save money and be ahead of the curve by the end of the year.

Start planning/budgeting for next year

Review how much you spent on the most recent holiday shopping season. Add any cash purchases to your bank statement and credit card receipts. Try to estimate what you’ll need for holiday spending next year. Make a list of people you buy gifts for and set a fixed amount for each. And, of course, make sure the total is within your budget.

Start saving ahead of time so you can pay in cash

Once you know how much you’ll need for the next holiday shopping season, start saving. One way to avoid holiday debt is with a savings account dedicated to holiday expenses. Every month, deposit 10% of your budgeted amount, and by November, you’ll be ready for the holiday shopping season. Direct deposit can help tremendously with this effort.

When the high-cost season hits, you should have enough to buy gifts without going into debt. Make withdrawals from savings and pay cash for purchases. Avoid using credit cards, and you’ll likely avoid debt. Cash has a remarkable quality: you can’t overspend it.

Avoid sneaky costs

Save gift bags you receive and reuse old gift bags next season. If you’re worried about giving one to the same person who gave it to you, label them so you don’t. Get gift wrapping early—watch for after-holiday sales. Why pay full price when you can get supplies for 50% or 75% off? Shop at a “dollar store” for wrapping materials.

Focus on essentials; go for a simple holiday menu

When hosting parties, stick with a simple holiday menu. The classics are always favorites and don’t have to be expensive. Organize a potluck dinner for gatherings rather than footing the entire bill yourself. Create an online spreadsheet where attendees can sign up for what they’ll bring.

Learn to use shopping apps

Since you’ve started shopping early, there’s time to wait for discounts. Many shopping apps let you tag things you’re interested in and then send notifications when they go on sale. When you make a gift list in advance, you can follow items on the apps. Apps also can make it easy to compare prices and track price trends.

Favor holiday planning over holiday debt

The holiday season is one area where thinking ahead can create a wide range of benefits. Holiday shoppers might avoid stress when they have a plan for balancing celebrations and finances. They can focus on things that truly bring joy. Avoiding spur-of-the-moment decisions and last-minute purchases is a great way to stay out of holiday debt.

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.


Learn more about managing debt

Financial confidence starts here

We have the information and insights you need to take control of your financial health.

Get started