Holiday Debt: 6 Tips to Obliterate What You Owe

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.