Payback Plan Guide for Holiday Credit Card Debt

Make a List of Your Holiday Debt

It may sound silly, but simply sitting down with a pen and paper or a spreadsheet can help you pay back holiday credit card debt. Begin by writing down the credit cards you have. Then the balances owed for each. In return, you get a bird’s eye view of your current holiday debt – an advantage for your plan of attack.

List Out Credit Card Interest Rates

On this list, you should also allow space for interest rates. The soaring interest rates and frequent changes make it a good point to highlight the cards with the highest rates. You can use this as a guide to determine how you want to tackle your holiday credit card debt. Typically, there are two methods of cutting down on credit card debt, and that’s either the snowball method or the avalanche method. The snowball method is when you tackle your smallest credit card debts first until you get to your highest credit card debt balance. With the avalanche method, you need to take note of interest rates, as with this method, you tackle the debt with the highest interest rate first.

Consider a Balance Transfer Credit Card

This next step in the guide is optional. Depending on your situation and your comfort with your credit card debt, you may want to consider a balance transfer credit card. In essence, a balance transfer credit card is used to pay down an existing credit card debt at a better rate.

As previously mentioned, credit card interest rates are worth noting. Many balance transfer credit cards have introductory rates as low as 0% for a certain period. Transferring over existing credit card debt to a card like the Citi® Diamond Preferred® Card will benefit you with 0% intro APR for 21 months on balance transfers. The lengthy introductory offer – three months shy of two years – can help you avoid the accruement of interest on existing credit card debt. Ultimately a balance transfer can help you pay less money on your credit card debt.

Make Way For Additional Income

Easier said than done, but if you can manage a side hustle or two, it may help as a temporary aid to pay credit card debt. Again, this step is optional, but making extra cash can make a big dent in holiday credit card debt. Something like a garage sale or selling clothes you no longer need or want online can help as additional income.

Pay More Than Your Minimum Balance

Once you have taken all the proper steps and executed your plan to pay down holiday debt, plan how you will pay your balance. Always aim to pay more than your credit card minimum balance. The reason for this is to save yourself time and to avoid paying a ton of money on interest.

For example, if you have a credit card balance of $5,000 with a 26.99% APR and plan on paying it down in 21 months, you will pay about $1,328.25 in interest – assuming you pay $301.35 monthly. If you decided to only pay the minimum, which can sometimes be as low as $40, you will never catch up. Your debt will continue to pile up due to the interest. In the example above, if you switched out the $301.35 monthly payment for a lower payment of $120, your total paid interest on that debt can be as high as $9,928.47. And it would take you over ten years to pay down that debt if you were stuck with a $120 monthly payment.

The Last Step

More like the last piece of advice in this guide to help pay back your holiday credit card debt. Try your best to not use the credit cards you’re paying down. Think before you buy, and when you do make a purchase use your debit card. If you continue to charge the credit cards you’re paying down, the debt will only continue to pile on. Unless an emergency happens and you have no choice but to use your credit card, it’s best to avoid use and instead make purchases with debit or cash.

Related Article: How To Manage Holiday Spending Debt

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