Credit card hangover: how to pay off your holiday debt

Credit cards can seriously come in handy in the holiday season, particularly when it comes to buying decorations, presents and food for visiting family members. However, if you find yourself struggling with a debt hangover come January, there are steps you can take to get your finances back under control.

The latest credit card statistics show that Aussies have slashed national credit card debt levels to $19.71 billion in October – the first time levels have been under $20 billion in almost 16 years.

However, the rate at which we’re paying off debt slowed. This may be a sign of what is to come as the data catches up to Christmas spending figures.

The good news is that if your January credit card statement is higher than expected, or if you’re unsure how to pay it off, you’re not alone.

Here are a few things to consider if you’re struggling with your holiday debt.

Identify your window of opportunity

Some credit cards may require you to pay off your statement balance in full immediately upon receiving a bill. However, many offer cardholders a handy window of opportunity – also known as interest-free days – to pay down your card debt without accruing interest.

Once you’ve got your holiday credit card bill:

• Identify how many interest free days you have. This may be on your card statement, or you may want to double check online or speak to your card issuer directly. The most common number of days is usually around 44-55 but can be higher or lower.
• Identify the card purchase rate. You want to know exactly how much an outstanding bill is going to cost you if you’re unable to pay it off in full during the interest-free window. This will help for your budgeting.

Keep in mind that if you have any credit card fees, such as annual fees, monthly fees or late payment fees, these may factor into your January bill.

• If you’re unsure how a credit card’s interest free period works, read our guide here.

Work off your debt

Now you know just how many days you have to pay down your debt before accruing interest, you can work on the plan. Even if you don’t have any interest free days, these steps may be able to help you get on top of your card debt.

• Make a budget and stick to it

It’s obvious, but it’s the most important part of paying off any debt. Go through your finances with a fine-tooth comb. Take stock of your income, how much you save each month, regular expenses (like bills and rent/mortgage payments) as well as other expenses, such as memberships, subscription services and dinners out. Now, consider ways you can reduce these expenses and put more of your income towards your credit card debt. Even cutting down from two to one coffee a day alone may save you $192 in 55 days.

• Sell your belongings

While it may not feel that glamorous, selling your belongings is a tried-and-true way to make some much-needed cash. Online platforms such as Facebook Marketplace and Gumtree make this process easier than ever before. You may even have a few Christmas presents you’re not keen on (sorry Aunt Judy) that could be better served in someone else’s hands, with their cash in your wallet.

• Consider a balance transfer card

If you’ve taken stock of your interest free days and your purchase rate, and you know you won’t be able to pay off your debt for some time, you may want to consider if a balance transfer card could help you. These handy credit cards allow a cardholder to transfer the balance of one card to a new one, typically with a large interest-free window. You may be offered a balance transfer deal of a few months or even two or more years, depending on the card issuer. Keep in mind these come with their own risks and fees, so do your due diligence before applying.

Compare credit cards