While some Americans are still recovering from holiday festivities, many others may have lingering effects of spending regrets. Overall U.S. retail sales increased 7.6% year-over-year between Nov. 1 and Dec. 24, according to the latest Mastercard SpendingPulse survey.
For many consumers, the amount of debt they took on to pay for holiday purchases grew as well. A new LendingTree study found 35% of Americans amassed holiday debt in 2022. The average amount was $1,549, the highest level since 2015 when the survey was first taken. And 37% of those taking on holiday debt said it would take them at least five months to pay it off.
If you want to pay off your holiday debt well before this summer, here are seven steps you need to take now.
1. Pay off a set amount of debt in 3 to 5 months
More than half of holiday shoppers planned to pay with a credit card, the PwC survey found. The average household’s credit card balance exceeds $9,000. Overall, credit card balances for U.S. consumers had already reached their highest level in 20 years by last November — 15% higher than the year before, according to the Federal Reserve Bank of New York. Paying down the extra holiday debt you accumulated can help reduce some of that financial pressure.
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This can be one of your New Year’s resolutions.
“If you’re strapped for cash today, plan for tomorrow,” said Nicole Cope, director of wealth strategies at Ally. She recommends starting 2023 with a resolution to pay off any high-interest credit card debt first, then setting a budgeting goal of paying it off in three to five months.
2. Work on improving your credit score
If your credit score is “good” to “excellent” — a FICO score of 670 or higher on a scale of 300 to 850 — you’re more likely to qualify for lower interest rates on credit cards, car loans and mortgages, experts say. So having a good score can have a dramatic impact on the cost of your debt. The more you cut the cost of the debt, the faster you’ll pay it off.
Some credit card companies will provide your credit score for free. It’s often on your billing statement. To improve your score, start by checking your credit report and disputing any errors.
