Paying off that holiday debt after the silly season

If you’ve come out of the spending season with a soaring credit card bill, there are several strategies you can use to get back in the black. Here are eight to consider.

Many Australians will find themselves entering the new year carrying a bit more credit-card debt than they’d like. After all, we’ve just celebrated Christmas in a year that was already putting pressure on household budgets.

If you find yourself in this situation, there are many things you can do to reduce or extinguish credit card debt in the new year. Here are a few strategies to consider.

1. Come up with a plan

Before you start tackling your debt, it can be handy to map out the situation. You may wish to add up how much you owe in total, to whom you owe money, and when the payments are due. From there, you can move to strategies to bring down the balance.

2. Curb discretionary spending

Now that we’re through the Christmas and New Year period, it could be time to put the brakes on non-essential spending. You could consider eating only homemade food in January, cutting out alcohol and coffee, and pausing subscriptions or memberships for the month.  

3. Earn additional cash

The other way to add to the budget is by earning additional income. Is there a promotion you could apply for at work? A side hustle you’ve always wanted to try? Perhaps you could have a summer cleanout and sell items online or at a garage sale, or rent out a room in your home.

4. Don’t add to the debt

If it’s avoidable, try to pause any additional spending on the credit card. If you add more to your debt, it’s likely to slow down your repayment plan. You could also consider lowering your credit limit to reduce the temptation.

5. Make higher repayments if you can

If you do find extra income or savings, consider making higher repayments. It may lead to you paying off your credit card sooner by avoiding additional interest.

6. Target certain debt first

If you have multiple credit cards or forms of debt to clear, consider creating a hierarchy of what to target first. There are two popular strategies you may wish to adopt here:

• The debt avalanche: This involves making the minimum payments on all cards, then using any additional money to pay extra on the debt with the highest interest rate.
• The debt snowball: Instead of targeting higher-interest debt, the debt snowball method involves tackling smaller debts first and paying them off completely, then moving to bigger sources of debt.

7. Reduce the number of cards

If you have multiple credit cards accruing interest, it can be hard to put a dent in your debt. Consider tackling one credit card at a time and canceling the card once it’s paid off.

8. Seek help if you need it

Sometimes, debt becomes a bit too hard to manage alone. If this happens, it’s important to remember help is always available.

• If you’re experiencing financial stress that is affecting your ability to pay off your credit card or home loan, you can speak to our friendly team or please visit external resources listed on our website here.

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