Debts of Holidays Past: How to Pay Off Last Year and Plan Ahead Now

Quick Answer

You can pay off last year’s holiday debt by using strategies like the debt snowball method, the debt avalanche method, a balance transfer card or a debt consolidation loan. Getting your holiday debt paid off is part of designing a healthy holiday budget for this year.

A man wearing a gray shirt and glasses frowns while holding a credit card and a document.

It's a haunting thought that can keep you up at night: the debts of holidays past. As the holiday season rapidly approaches, it can feel overwhelming to still be paying last year's bills.

If you racked up holiday debt shopping last year, you're not alone. A 2021 Experian survey on holiday shopping found that more than half of respondents felt like they spend too much during the holidays.

If you've got lingering debts from the last holiday season, there are steps you can take to tackle them and even set a better budget for the coming gift-giving season. Avoid lingering debt specters this time next year by following our tips.

4 Ways to Pay Off Last Year's Holiday Debt

As you look forward to this year's holiday season, you may feel defeated if you're continuing to tackle last year's holiday purchases. But there are clear and effective debt repayment strategies that can help you pay your accounts in full, perhaps sooner than expected. These include:

  1. The debt snowball method: When you use this seasonally appropriate method, you start by paying off the smallest credit card balance first while making minimum payments on your other bills. Then as you gain repayment momentum, put more money toward the next biggest debt and so on until your total debt is paid off. Paying off smaller balances first can help you stay motivated to tackle larger balances.
  2. The debt avalanche method: Alternatively, you can put the most effort into paying off the credit card with the highest interest rate first. Then work your way down through accounts that carry gradually lower rates until you pay off all balances. This could save you the most in interest charges.
  3. Balance transfer card: Balance transfer cards to pay off holiday debt may offer a 0% annual percentage rate (APR) introductory offer. This can give you time to pay down your debt without acquiring more interest.
  4. Debt consolidation loan: You can take out a loan at a lower interest rate to pay off high-interest credit cards. Though you ultimately owe the same principal, you can save significantly with a lower interest rate while you pay off your debt.

Even if you can't completely wipe out last year's debt before the upcoming holidays, consider getting started now. Doing so can help with this year's shopping budget. That's because you'll pin down some regular debt payment amounts and shape your expendable income around that.

5 Ways to Stick to This Year's Holiday Budget

Once you address your debt, it's important to set up a budget for the upcoming holidays to avoid acquiring too much debt again. There are many ways to set up a holiday budget, including:

  1. Shop with cash. Some people feel the easiest way to avoid overspending is to take a set amount of cash shopping and not spend any more than what they have. Come up with your gift-giving list, set a budget for each and stick to those amounts.
  2. Automate your savings. You can set up a second savings or checking account and automatically have a percentage of your paycheck deposited—out of sight out of mind—for gifts.
  3. Swap your holiday savings with another budget item for a couple of months. If you have a non-essential category in your budget, consider re-labeling it as holiday shopping temporarily. For example, put the amount you'd normally spend on takeout into your holiday fund and cook at home instead. Doing this in the few months leading up to the holidays can help make sure you have enough money without displacing essentials in your budget.
  4. Buy one gift at a time. Instead of going all-in one weekend and overspending, begin several weeks before the holiday season to buy gifts one at a time that stays within your weekly budget.
  5. Suggest a no-buy holiday with your family. One of the easiest ways to slash your budget for the holidays is not to spend at all. No-buy holidays are becoming more popular, with family members gifting favors, passing on well-loved hand-me-downs, picking up finds from local Buy Nothing groups and making gifts instead of spending on shopping.

Sticking to your budget and easing holiday financial stress is the best gift you can give to yourself this holiday season.

Banish Last Year's Holiday Debts

Start banishing last year's holiday debts when you check your credit report for free to pin down exactly what you owe on your accounts. Your credit report lists out open accounts and your most recent reported balances, so it offers great visibility that can help you get started on your debt repayment journey.

The holidays are coming, but you've still got a couple of months to make sure the debts of holidays past don't make an uncanny visit on the eve of this season.