50 ways to pay down holiday debt & start 2021 right


Written by:

The 2020 holiday shopping season has put many people in the red. Per a recent survey from LendEDU, 63% of Americans said they were taking on a record amount of credit card debt this year — a stat that isn’t surprising, given the havoc the ongoing coronavirus pandemic and subsequent recession have wrought on many people’s financial health. 

How to pay down holiday debt

If you find yourself with big balances due in January, there are some steps you can take to expedite eliminating them. Here are 50 ways to pay down holiday debt and start 2021 right.

1. Assess your debts

Total the amount of debt you are carrying across credit cards or other financing. Identify the interest rate associated with each balance so you can decide on a repayment strategy. 

2. Aim to pay more than your minimums

You want to minimize the amount of interest you are accruing on credit card balances as you pay them down. Fortunately, there are few options for prioritizing payments. 

3. Start a debt avalanche

If you have balances on multiple credit cards, you may be able to expedite your way out of the red by utilizing the debt avalanche method.

“List your debts in order from highest to lowest interest rate,” Sara Rathner, credit card expert at personal finance website NerdWallet, explains. “Make minimum payments on all of them each month while you apply extra funds to the debt with the highest interest. Once you pay that off, begin to tackle the debt with the second-highest payment.”

4. … or toss a debt snowball

The debt snowball method involves paying down your smallest balance first, while making the minimums of your other accounts to give yourself a psychological boost as you work your way out of debt.

“How do you eat an elephant?” says Jason Krueger, Financial Advisor with Ameriprise Financial in Madison, Wisconsin. “One bite at a time. By paying off the smallest debts, the list is more manageable.” 

5. Consider a balance transfer credit card

If your credit is in good shape, consider opening a balance transfer credit card, which lets you transfer a high-interest balance to a new card that touts a 0% APR for a set period of time. 

“The best balance transfer cards feature 0% introductory balance transfer APRs that often last a year or more, providing plenty of time to knock out your holiday debts without incurring interest charges,” says Mason Miranda, credit industry specialist with finance site Credit Card Insider. 

Note: You generally pay a fee to transfer a balance, so crunch the numbers to make sure you will come out ahead.

6. Negotiate a lower interest rate

If you can’t qualify for a new balance transfer card, call your current credit card issuer (or issuers) to see if they might lower your APR. Some might be willing to do so if you have a history of making payments on-time. 

7. Look into a debt consolidation loan

Some personal loans offer lower interest rates than credit cards, so, if you’re dealing with a particularly high APR, it might be worth looking into whether you can consolidate your balances into one monthly loan payment. 

Again, read all the fine print to make sure this move is in your (literal) best interest.

8. Try to boost your credit score

You can potentially qualify for better financing offers from current and prospective lenders by improving your credit score. 

You can possibly get a boost by paying down high credit card balances (we understand, you’re working on it!), making all payments on time and disputing errors on your credit report. To get a clearer picture of how you might improve your standing … 

9. Check your credit report

You can access your credit reports from the major credit bureaus Equifax, Experian and TransUnion for free each week through April 2021. Visit AnnualCreditReport.com to pull them. 

10. Automate your payments

No matter what debt payoff strategy you decide to utilize, it’s a good idea to set up autopay on all your accounts so you don’t inadvertently miss a payment and incur unnecessary interest or late-payment fees. 

“Set up your monthly payment to cover your minimum payments plus the maximum you can possibly afford to send,” Todd Christensen, education manager at Money Fit by DRS, a nonprofit debt relief agency, says. 

11. Make extra payments

Of course, it helps if you can make more than one credit card or loan payment each month. Fortunately, we have some ideas on how you can generate more dollars to put toward your debt.

12. File your 2020 taxes

That way, you can use whatever refund you receive to pay off remaining credit card balances, says Molly Ford-Coates, founder and CEO of Ford Financial Management.

The Internal Revenue Service generally starts accepting tax returns in mid-January. Employers must send your W-2 statements by Jan. 31, 2021. 

13. Check your tax-withholding

If you are entitled to a big refund this year, there’s a possibility that your employer is taking too much money out of each paycheck. Use the IRS’ Tax Withholding Estimator to check if a new W-4 is in order.

14. Take advantage of other potential windfalls

“If you receive a holiday bonus, put some of that money toward your debt,” Ford-Coates says.

15. Talk to a credit counselor

If you’re truly drowning in debt, consider tapping a credit counselor. Some non-profit organizations and credit unions offer this service at little-to-cost. 

16. Avoid being too hard on yourself

“Telling yourself you did something wrong with your money will never be an effective way to stop you from doing it again,” Certified Financial Planner Olivia Summerhill says. “Making sure you are aware you spent too much and trying to give yourself grace during the pandemic is a smarter way to go.”

17. Cut all discretionary spending

Common sense, we know — and easier said than done — but it’s an important step. Think in increments.

“Commit to a 30-day no-spending challenge, then use the money you saved to apply toward your holiday debt,” says Sabrina Hamilton, creator of FinanceOverFifty.com.

18. Put your credit cards completely on ice

If you struggle with impulse-shopping, consider drastic measures. 

“Hide your current credit and store cards or have a family member hide them,” Christensen of Money Fit by DRS says. 

19. Scrub the web

“Delete [your credit cards] from your digital wallets and online shopping accounts so you won’t continue to use them while trying to pay them off,” Christensen adds.

20. Switch to cash

Studies have found that people spend less when they do so with paper.

21. Audit your bank or credit card statements

That way, you have a handle on how much money you need for non-discretionary spending, like rent, utilities or groceries. A statement audit will also help you identify potential money-wasters. 

22. Draft (or redraft) your budget

Get a better idea of how much you’re spending on non-discretionary items by drafting a budget. You can use a simple spreadsheet or a budgeting app to get started. 

23. Pay your debt first

Ensure extra dollars go toward burgeoning balances by prioritizing those payments once your fixed expenses are addressed. 

24. Cancel unwanted subscriptions

Eliminate money-wasters by nixing recurring charges for services you’re no longer using or don’t need.

25. Negotiate with service providers …

You can also try calling service providers, like your cable, cell phone or insurance companies, to determine if you qualify for new discounts or savings. 

26. … and other creditors

Alleviate your total debt burden by seeing if other creditors are amenable to new terms or repayment plans. 

Medical debts, in particular, can often be negotiated down if you’re willing to make an upfront payment. 

27. Downsize

Cut the cable cord. Become a one-car family or switch to a group cell phone plan. We’ve got 50 ways to save more in this roundup.

28. Tap an app

Apps like Trim and TrueBill can help you identify and cancel recurring (and potentially wasteful) subscriptions, while Mint or PocketGuard can help you set up a new budget. 

29. Redeem credit card rewards

Many rewards credit cards let you put points or cash back toward existing balances. 

“Now is the perfect time to request a statement credit so you can lower your next bill,” says Rathner of NerdWallet. “Right now, many travel cards are allowing cardholders to apply points and miles to everyday expenses like groceries, so your miles can also help you save while your travel plans are on hold.”

30. Reap ancillary rewards

Grocery store loyalty programs, for instance, can help generate more savings on a fixed expense, like food. And you can get certain discounts on various items or services through AAA or AARP memberships. 

31. Install a coupon aggregator

Browser extension Honey can automatically scour the web for and apply discounts and coupon codes at checkout, saving you a few valuable dollars when you do have to spend online.

32. Start a side hustle

“You can fast track your debt payoff goal by boosting your cash flow and making some money on the side,” says savings expert Andrea Woroch. “There are plenty of flexible side hustles you can do from home.” 

Here are 49 side hustles to consider in 2021.

33. Sell your stuff

“You can sell gadgets at decluttr, clothing at Poshmark and just about everything else through OfferUp so you don’t have to worry about packing and shipping, if you sell locally,”  Woroch says.

34. Leverage applicable return policies

Consider returning holiday gifts that aren’t a hit, don’t fit or seem unnecessary in retrospect.

35. Swap gift cards for cash

Gift card exchanges, like Cardpool or Gift Card Granny, will purchase unwanted plastic to resell on their marketplaces. (Expect less than face value, of course.) 

36. Meal plan

“Food is one of the biggest expenses in any household’s budget but particularly over the holidays,” says Anna Barker, personal finance expert and founder of LogicalDollar. “This means that it offers one of the biggest opportunities to cut your spending. A great way to start doing this is by meal planning, to make sure you’re only buying what you need (and what you’ll actually use before it goes to waste) at the supermarket.” 

37. Up DIY efforts

Put landscaping services on hold, for example, or see if you can make small home repairs on your with the help of a few YouTube videos. 

38. Get thrifty

Save on clothing and accessories by shopping second hand stores or online marketplaces like thredUP.

39. Time new purchases

Spending freezes can’t last forever, but you might be able to save significantly on certain purchases by buying them at the “right” time. For instance, expect winter clothing to go on sale as soon as the weather breaks. 

40. Comparison-shop

Ensure savings all year round, by using sites like PriceGrabber or Shopzilla that can help you quickly compare prices across retailers.

41. Look into 0% APR introductory offers

Once you have to start spending again, consider opening a new credit card that offers a 0% introductory APR on purchases (as opposed to balances, which we mentioned earlier). That way, you can at least minimize accruing new interest for a time.

Use the card sparingly to avoid being saddled with a big balance at the end of the introductory APR period. 

42. Consider canceling high-interest cards

As you pay balances off, consider closing cards that have exorbitant APRs. However, wait until your other cards are well below their credit limits. A high debt-to-credit ratio across and on individual cards can hurt your credit score.

43. Treat your credit card like a debit card

“Only making purchases on a credit card that you can pay off right now will help ensure that you avoid getting into further debt,” Miranda of Credit Card Insider says. “Pay off your statement balance each billing period to avoid any interest in the future.”

44. Set up spending alerts

Many banks or credit card issuers let you request text messages or email notifications when charges over a certain amount appear on your statements. These alerts can be a useful deterrent if you’re trying to avoid impulse-spending. 

45. Turn off one-click ordering

Make it harder to order items, particularly on Amazon, by disabling this feature.

46. Minimize fees

Save some dollars by avoiding these 15 financial fees you don’t have to pay (but probably are)

47. Calculate whether it’s worth paring back investments

Again, if your debt is incurring interest at a very high rate, it might be worth temporarily lowering (or at least not increasing) the amount of money going into your 401(k) while you’re paying down your balances. Re-boost those savings once the extra cash flow has gotten you back on track. 

48. Start prepping for the 2021 holiday season

That way, you’re not facing the same problem next year.

“How much have you spent from Thanksgiving time to New Year’s time?” Ford-Coates of Ford Financial Management says. “Start putting that amount away little by little. The goal is to be able to pay for next holiday season in cash.”

49. Automate your savings

Force yourself to save (more) throughout the year by automatically rolling a certain amount of money into a separate savings account. You can also look into apps that help you automatically save your spare change. 

50. Establish a proper emergency fund

Experts generally recommend keeping three-to-six months worth of expenses stored away in a high-yield savings account.

Once you’ve paid down your holiday debt, you can focus on building wealth. Here are our 50 favorite tips for making your first $1 million

This article was produced and syndicated by MediaFeed.org.


Jeanine Skowronski

Jeanine Skowronski is a veteran personal finance journalist and content strategist, she has previously served as the Head of Content at Policygenius, Executive Editor of Credit.com and a columnist for Inc. Magazine. Her work has been featured in The Wall Street Journal, American Banker Magazine, Newsweek, Business Insider, CNBC and more.