logo
CNBC.COM
CNBC Select may receive an affiliate commission when you click on the links for products from our partners. Click here to read our full advertiser disclosure.

How to pay off holiday debt and save on interest charges

Getty Images

If you went a bit overboard with the holiday shopping and racked up debt this year, you're not alone. Americans planned on spending $1,048 on gifts, food, decorations and more this past season, according to the National Retail Federation.

Americans are not strangers to carrying credit card debt — about 61% of Americans have a credit card and cardholders carry an average balance of $6,194, according to Experian.

While credit cards can be a great asset, they also make it easy to overspend, which can lead to debt. This is especially common during the holidays when you're buying gifts and entertaining guests and spending more than you usually do.

This is a problem is you can't pay off your balance in full and incur high interest charges. Retailers might offer a lot of discounts during the weeks leading up to Christmas, but you're not getting much of a deal if you end up paying 16% APR or more on your credit card balance each month.

There are plenty of ways for you to tackle holiday debt, but you'll need to consider interest rates, fees and how much you can afford to pay before settling on the best repayment method.

Below, CNBC Select reviews the smartest ways to pay off holiday debt so you can start 2020 financially strong.

How to pay off holiday debt

  • Complete a balance transfer
  • Consolidate debt with a personal loan
  • Borrow money from family or friends

Complete a balance transfer

One way to tackle holiday debt is to complete a balance transfer. You can transfer debt from your current credit card(s) to a balance transfer credit card that offers no interest for up to 21 months.

During the intro period, create an aggressive repayment plan so you can start living debt-free. You can divide your balance by the length of the intro period to figure out how much you need to pay each month to have a zero balance before the intro period ends.

For example, if you transfer $3,000 to the Citi Simplicity® Card with a 0% APR for the first 21 months on balance transfers (then 16.24% to 26.24% variable APR), you'd need to pay roughly $143 a month. Keep in mind there's a 5% balance transfer fee ($5 minimum).

There are no-fee balance transfer credit cards, like the Amex EveryDay® Credit Card, with a 0% APR for the first 15 months on balance transfers (then 14.49% to 25.49% variable APR) (see rates and fees). This card can save you the $150 fee the Citi Simplicity® Card charges, though you'll need to pay more each month ($200, assuming a $3,000 transfer) to have no balance at the end of your 15-month 0% intro period.

Review the fine print associated with a balance transfer card, since card issuers often set maximum limits on the amount of debt you can transfer, and you can't complete a transfer between cards issued from the same bank. Also take note that good or excellent credit (scores 670 and greater) is often required to open a balance transfer credit card.

Find out more about how to make the most of your balance transfer and what to do once your balance transfer is complete.

Consolidate debt with a personal loan

Personal loans can be a good alternative to balance transfer cards if you have a large amount of debt or don't want to open another credit card. If you used multiple cards for holiday shopping, you can consolidate the balances into a single personal loan. And depending on your credit score, you may qualify for a loan amount that will cover your entire balance.

A personal loan provides you with a fixed amount of money over a fixed time period and at a fixed interest rate. It's rare to find 0% interest rates for personal loans, but rates are often lower than keeping a balance on your current credit card(s).

Borrow money from family or friends

If you don't have that much debt and want to avoid taking out a personal loan or opening a balance transfer card, you may want to consider asking a family member or close friend for a loan.

Plus, if you're credit score is poor (below 580), you may have a hard time qualifying for a balance transfer credit card or personal loan in the first place.

Borrowing money can be the most affordable way to pay off holiday debt since chances are your family or friend won't charge you interest. But before borrowing any money, set up a repayment plan and stick to it. You don't want to risk damaging your relationship.

Take action: 10 financial New Year's resolutions for 2020 and how you can achieve them

Information about the Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

For rates and fees of the Amex EveryDay® Credit Card, click here.


Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Top Offers from Our Partners

American Express® Gold Card
Apply Now
Terms Apply
Best Dining Rewards Card
American Express® Gold Card
35,000 points
Blue Cash Preferred® Card from American Express
Apply Now
Terms Apply
Best Grocery Rewards Card
Blue Cash Preferred® Card from American Express
$250 statement credit
Citi® Double Cash Card
Apply Now
Terms Apply
Best No Annual Fee Card
Citi® Double Cash Card
Up to 2% cash back
Discover it® Secured
Apply Now
Terms Apply
Best Secured Card
Discover it® Secured
Cashback Match™
Opinions are our own and have not been reviewed, approved, or endorsed by our advertising partners