Key Takeaways

• It’s easy to end up with holiday debt. To pay it off, start by understanding the total amount you owe.
• Choose a payoff strategy that you’re most likely to follow.
• Consider a 0% interest rate balance transfer credit card offer to minimize interest or negotiate a lower rate on your current cards.
• Use your tax refund to help pay down your debt.
• Avoid holiday debt next year by saving now.

Not long after the ball drops on New Year’s Eve, our happy memories of holiday celebrations have faded, especially as credit card bills start rolling in. From buying gifts to hosting dinners, the costs of creating holiday memories add up — and sometimes, they leave us with more debt than we’d like. If you’re facing holiday debt, you’re not alone. A recent LendingTree study¹ shows that 36% of Americans took on holiday debt in 2024, borrowing $1,180 on average. Many are feeling the weight of those choices: 60% are stressed about their spending, and 21% expect to take five months or longer to pay it off. If you see yourself in these statistics, all is not lost! Here are steps you can take to pay down your holiday debt — and tips to help you avoid it next year!

Step 1: Know What You Owe

Start by adding up your balances. Write down how much you owe on each card and the interest rates, then add everything to get a clear picture. Next, look at your monthly budget to determine how much you can dedicate to reducing your debt each month. Can you cut back on things like eating out or entertainment to free up money to tackle your debt?

Step 2: Pick a Payoff Plan

Choose a strategy you’ll stick with:

• Snowball Method: Pay extra on the smallest balance first while making minimum payments on the rest to avoid late fees. Once it’s paid off, move on to the card with the next smallest balance.
• Avalanche Method: Focus on the card with the highest interest rate first. Pay it down while making minimum payments on the rest, then work on the card with the next highest rate.

Step 3: Reduce Your Interest Costs

Consider transferring your balances to a credit card with a 0% introductory rate. This can save you a lot in interest. But watch for the fine print:

• The 0% rate usually lasts between six and 18 months, so aim to pay off your balance before it ends.
• Balance transfers often come with a fee — typically 3% to 5% of the amount.
• Opening a new card may affect your credit score, so be prepared.

Alternatively, if you have a good credit history, you may be able to call your current card issuers and ask for a lower interest rate.

Step 4: Put Your Tax Refund to Good Use

If you’re getting a tax refund, consider using it to pay off your debt. Reducing what you owe now will give you more breathing room later.

Step 5: Prepare for Next Year

Want to avoid holiday debt next year? Start saving now! Tools like Goals² in Lake City Bank Digital can help. Simply set a savings goal and a deadline, and Goals helps you set up automatic transfers to make sure it happens. Finally, unsubscribe from tempting holiday sales emails so you’re not as likely to overspend. By putting these strategies into action, you can transform post-holiday debt and stress into a fresh start and set the stage for a stronger financial future.