Odds are your recent holiday shopping carried some kind of stress. Maybe you agonized over finding the perfect gift for a dad who already buys himself everything he needs. Maybe you waited until the eleventh hour and had to sweat out a shipping deadline or battle throngs of fellow procrastinators in the stores.
Or maybe you were just more generous to your loved ones than your wallet could afford.
According to a 2015 holiday spending survey, people in relationships are willing to take on an average of $200 in credit card debt to buy gifts for each other, and that number is likely higher when accounting for gifts for children and others.
If that was the case for you, don’t let the stress of holiday-related credit card debt linger.
Know your pain points and how to massage them
If you took on debt to pay for the holidays, the pain of your debt hangover is largely determined by where your debt sits — that is, whether you charged it to your everyday credit card, used a store credit card or put it on a card with a low (preferably 0%) annual percentage rate offer. Ideally it’s that last one, because it means you also bought yourself some time.
But if you used your everyday credit card, whether for cash back or travel rewards, you’re potentially paying an average of around 19% in interest annually. That can get costly, depending on how expensive your holiday tally was and whether it added to a balance you were already carrying. If you’re getting buried by interest charges on that card, explore your options for debt consolidation. More on that later.
If you used a store credit card, make sure you understand what you’re on the hook for, and when. Many store cards may allow 0% financing through a “deferred interest” offer, which sounds similar to a 0% APR introductory offer you might see from a general-purpose credit card — but it’s not the same thing. “Deferred interest” means you’ll potentially still owe withheld interest after the introductory period closes, and these cards also can come with a raft of additional complications. Contrast that with 0% offers from banks, which waive interest charges outright for the introductory period.
You can avoid deferred interest charges if you pay off the debt before the introductory period closes. I’m aiming to do this myself. Last spring I bought an iMac in an Apple Store on a deferred interest offer. To avoid those future interest charges, I’m paying back enough every month to get me in the clear with a few months to spare.
Clean up the mess
Wherever your holiday debt sits, you need a plan to pay it off. I recommend three steps:
1. Recognize that you have the debt and that ignoring it won’t make it disappear. That doesn’t mean shaming yourself. There’s nothing wrong with spending money on yourself or others, especially during the holidays. But the debt is there, and before you can tackle it, you have to acknowledge it.
2. Take action. That means making the minimum payments on your credit card bills — and then paying more. To cut down on the interest owed, I recommend paying at least two to three times the monthly minimum payment, with a target of paying off holiday debt in three months or less. Fortunately, this is a good time of year for that strategy: The holiday season and the months that follow it may provide predictable windfalls, like cash gifts, year-end bonuses and tax refunds. Use those to start digging out.
If you have a sizable amount of debt and your credit score is at least “average” — above 630 or so — you could use a balance-transfer credit card to consolidate your debt onto a 0% offer. Doing so will save you a lot of money in interest payments.
3. Don’t give up. Paying off debt, especially if you’ve accumulated a lot of it, takes time. Look for opportunities to cut unnecessary costs, especially recurring expenses you might no longer value, like an old gym membership or online or app subscriptions. To boost your income, try picking up extra work hours or a new side gig.
Dealing with a holiday debt hangover may require humility, some creative financial adjustments and patience. But the trade-off can mean more financial freedom, and that’s one of the best gifts of all.
Sean McQuay is a credit and banking expert at NerdWallet. A former strategist with Visa, McQuay now helps consumers use their credit cards and banking products more effectively. If you have a question, shoot him an email at firstname.lastname@example.org. The answer might show up in a future column.