5 Steps to Crush Your Holiday Debt

Don’t let holiday debt get you down: Use these 5 steps to pay down balances quickly

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The holidays may be long over, but the season often lingers well into the new year in the form of unwanted credit card bills. In fact, a recent LendingTree study found that 36 percent of Americans racked up an average of $1,181 in holiday debt. With interest rates hovering over 20 percent and New Jersey ranking among one of the top states with rising credit card delinquency rates, paying down these balances is ever crucial. However, it can become increasingly challenging without the proper guidance or tools.

If you aren’t sure where to get started, follow this step-by-step guide to pay down holiday debt faster.

Assess the damage and make a plan.
Paying the minimum due on your credit card balances will make it harder to get out of debt thanks to high interest fees that pile up each month. While paying double to triple the minimum due is a good place to start, creating a debt repayment plan can help you figure out just how much to put toward your balances and when you can finally be free of the extra financial baggage.

To start, outline how much you owe on each credit card and note the interest rate ask paying down the card with the highest interest rate will help you save more money. Apps like Debt Payoff Planner can help you create a repayment plan that works for your budget.

Review and reduce monthly bills.
Your bills could be full of budget leaks in the form of unused services, or forgotten subscriptions. Take, for example, this study by C&R Research which found that 42 percent of consumers forgot about a subscription they’re paying for but not using. Meanwhile, another study from WhistleOut found that Americans waste $1,500 a year on excessive wireless data plans. Cutting out wasteful spending can free up some extra cash to make bigger debt payments without sacrifice.

Begin reducing monthly bills by canceling unused subscriptions, bundling services, increasing insurance deductibles and switching to a lower-tiered data plan or moving to online-only wireless carriers like Mint Mobile which offer more affordable plans. They even have options designed for children with their first devices called Mint Kids, offering unlimited talk and text with 5GB of data for just $15 per month. This can be a huge area of savings for families, helping pay down debt faster.

Consolidate balances.
Paying down balances with high interest can feel like an uphill battle as fees pile up each month. However, debt consolidation loans can alleviate this pressure thanks to lower interest rates. Even consumers with low credit scores can qualify for a debt consolidation loan, with options available through sites like BadCredit.org.

Otherwise, consider transferring your balance to a balance transfer card to receive 12 to 21 months with no interest accruing. This way, your entire payment goes toward reducing your balance and nothing is wasted on those useless fees.

Boost your cash flow.
If you’re living on a tight budget already, finding extra wiggle room to make bigger debt payments may feel impossible. However, there are a few ways you can boost your cash flow to beat this dilemma.

Look for flexible side hustles you can do in your spare time such as pet sitting or virtual tutoring. You can also make money renting things like unused baby gear through BabyQuip. Finally, think about selling items you don’t need or use through local listings or host a garage sale.

Consider a no-spend diet.
Don’t overlook how daily spending habits impact your debt repayment progress. Even small unnecessary purchases can hinder your overall efforts. A great way to nip this quickly is to go on a no-spend diet for a week or month during which you commit to limiting purchases beyond the absolute essentials.

When it comes to essential purchases like groceries, pet food and cleaning supplies, take advantage of cash-back tools to earn more money back and put those extra dollars towards debt payments. For example, use a robust cash-back card like the Bread Rewards American Express credit card which offers an unlimited 3 percent on essentials like groceries, gas, dining and utilities, plus 1 percent back on all other purchases. You can also double down on cashback by using a web extension like Sidekick to earn money back online grocery orders, pet food and supplies, home care and more.

While paying down debt can feel overwhelming, remember to take it one step at a time. Even small steps will lead you in the right direction.

Andrea Woroch is a consumer savings expert. She has been featured as a media expert source on The Today Show, NBC Nightly News, FOX & Friends, ABC News NOW, MSNBC, Kiplinger Personal Finance, Smart Money and many more. 

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Read More:
From Gas to Groceries: Expert Tips to Save on Your Household Expenses
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5 Money-Saving Tips for a Financially Secure New Year

 

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