Holiday Debt: 6 Tips to Obliterate What You Owe
- Holiday debt can drag on well into the next year if you don't get ahead of it.
- Figure out which payoff strategy works best for you—consider options like a debt snowball or avalanche.
- Trim expenses and work a side hustle to knock out that debt quickly.
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If you ended the 2025 holiday season with debt, you're not alone. A good 21% of U.S. consumers borrowed money to cover their holiday spending this past year, says YouGov.
Being common doesn't make that debt less expensive, though. The sooner you're able to pay off your holiday debt, the less money you might spend on interest. And paying off holiday debt sooner could help alleviate some of your financial stress.
With that in mind, here are six tips for getting out of holiday debt and making sure it doesn't disrupt your finances for the whole year.
1. Calculate the Total Amount You Owe
If you racked up holiday debt across a number of different credit cards and buy now, pay later agreements, you might easily lose track of exactly how much money you owe and when your various payments are due. The first step in paying off holiday debt is to get a handle on the total amount you owe and which creditors you have balances with. From there, you can create a payoff plan.
2. Identify a Payoff Strategy That Works for You
Once you know how much holiday debt you've racked up in total, you can explore different strategies for paying it off. Two popular debt payoff options are the snowball method and avalanche method.
With the snowball method, you list your debts from smallest balance to largest and pay them off in that order. With the avalanche method, you list your debts from highest interest rate to lowest and pay them off in that order. For both methods, you continue making minimum payments across all the debts you’re not currently focusing extra money on.
Each option has a benefit. With the snowball method, you get to eliminate individual debts more quickly. That could make juggling multiple debts more manageable and keep you motivated.
With the avalanche method, because you're tackling your highest interest rates first, you could save money (or spend less of it on interest) in the course of getting out of holiday debt.
That said, it may be that the smallest individual debt you owe is also the debt with the highest interest rate. So depending on your situation, you might end up combining both strategies to rid yourself of holiday debt quickly—this combination is sometimes called a debt blizzard.
3. Use Extra Money Strategically
Extra money might come your way this year, whether in the form of a tax refund or a bonus at work. It pays to use that money to chip away at your holiday debt so you can eliminate it as quickly as possible. You may even want to open a dedicated savings account and send your tax refund or bonuses into it so there's no temptation to spend that money on other things.
4. Cut Back On Spending to a Reasonable Degree
You'll often hear that cutting all extra spending is a great way to get out of debt. That's not false, but it's also not a particularly fun or even feasible way to live.
Rather than slash all expenses, try to cut back on spending to a reasonable degree. If you're used to buying lunch every workday, only do it twice a week until your debt is paid off. If you pay for three streaming services, limit yourself to two. Small moves like that could make a big difference without causing misery in the process.
5. Work a Side Hustle
If most of your paycheck is needed to cover your bills, paying off holiday debt may be a slow process. To speed things up, get yourself a side hustle to earn extra money. Some options include driving for a rideshare service, caring for people's pets, house sitting, and working evening or weekend restaurant shifts. There are different options you can look at based on your schedule and earnings goals.
6. Take Steps to Avoid New Holiday Debt
Paying off existing holiday debt is a fantastic step in the right direction. But if you want to obliterate holiday debt for good, take steps to avoid racking up new balances during the upcoming holiday season.
Create a budget for this year's holidays and save a little money each month toward the total you intend to spend. If you're working a side hustle, the extra earnings you bring in could go not only toward paying off existing debt, but building a cushion for the upcoming holidays.
You may also want to consider canceling some credit cards if you're worried about the temptation to spend. Keep in mind, though, that canceling credit cards could cause your credit score to drop.
So you may instead want to keep those credit cards locked away in a safe place and only pull them out when you truly need them. Avoid storing those credit cards on your phone and other devices so you're less tempted to fall back on them. You may even lock the cards in your credit card app so they can't be used to make new purchases without first unlocking them.
The Bottom Line On Paying Off Holiday Debt
The longer you carry holiday debt, the more interest you might rack up, and the more your debt might cost you. Plus, letting holiday debt drag on for too long could take a toll on you mentally. If you're able to pay it off sooner, you'll have one less thing to worry about.
That said, if your holiday debt has become overwhelming and you're struggling to even make your minimum payments, you shouldn't hesitate to explore your options for debt relief. There may be different solutions available to you, so it's worth seeing which ones you qualify for.
Author Information
Written by
Maurie Backman
Maurie Backman is a personal finance writer with over 10 years of experience. Her coverage areas include retirement, investing, real estate, and credit and debt management.
Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
Frequently Asked Questions
Are holiday loans a good idea?
A holiday loan is usually not a good idea. Most loan terms run longer than a year, so you could end up making payments on last year's holiday loan while trying to cover this year's costs too.
How do you pay off holiday debt?
A few strategies help you pay off holiday debt:
Use a repayment plan such as debt snowball (paying the lowest balance first) or debt avalanche (paying the highest interest rate first).
Consolidate your balances with a loan, or move them to a credit card that offers a 0% APR balance transfer.
Cut a few costs and apply the savings to your balance.
Pick up extra income until the debt is paid off.
How much should I spend on the holidays?
One guideline is to set aside around 1% of your before-tax annual income for holiday spending. If you and your partner earn $125,000 per year together, that would be a $1,250 budget. The right amount for your family depends on your budget and priorities, and the most important thing is to choose an amount you're comfortable setting aside without adding to your debt. From there, build a spending plan for your full list of holiday expenses and start saving for Christmas or other holidays.