3 Strategic Shifts To Pay Down Credit Card Faster Before The Year Ends

Recent consumer research found that 45% of consumers with credit cards carry balances month over month. While we know that high interest rates can negatively impact wealth for these consumers, the holidays are a time where I see learners from my financial education program rack up more debt than they expect.

Here are three simple tips to keep your credit card debt from creeping into the new year.

Focus On The Lowest Credit Card Balance Instead Of Spreading Across Multiple

Your lowest balance credit card debt is the first place to look at paying down, especially with interest rates currently at around 27%.

My husband and I cleared $300,000 of debt in three years, with many ups and downs and unexpected surprises along the way. There were many times we felt discouraged and were ready to give up and start spending more again.

Instead of trying to pay a little extra toward multiple credit cards, pick the card with the lowest balance, regardless of interest rate. People may argue that the math makes sense to pay the highest interest, but I’ve found that can be discouraging if the balance is large.

By putting the minimum payments on all other debts and focusing on the credit card balance with the lowest amount, you will feel a sense of accomplishment that will help you carry on to the next balance. It also helps to simplify having one less account to track as you head into a new year.

Shift Your Priority From Points To Actual Cash Savings

I used to be obsessed with accumulating points just for spending on my regular purchases. Credit card marketing thrives on the feeling of missing out if you’re not gaining all these seemingly free rewards for flights, hotels and cash back.

But once I decided ignore my credit card points, I shifted my goal attention to researching interest-bearing options like high-yield savings accounts and certificates of deposits, which right now some are earning over 5% in passive interest.

I recently showed my financial education students some of my real-life numbers. In the first four months of 2023, I calculated how much I earned in credit card bonuses and it amounted to $154.21. But the amount I accumulated in interest and dividends from focusing on saving and investing resulted in $10,005.27.

These extra dollars in my bank accounts feel like a much more immediate reward than the points I have to accumulate by spending money instead of saving.

Put Your Credit Cards On Ice Until The New Year

If you’re feeling guilty, it’s not just you. As much as 60% of Americans are living paycheck to paycheck going into the holiday season, according to a recent LendingClub report.

Pausing your credit card usage can be a scary move if you’ve made using your credit cards a daily habit instead of a debit card. When I temporarily replaced my credit cards with a debt card, I also felt the fear of missing out on points.

But after a month of using only my debit card, it became abundantly clear I was overspending, because I started to overdraw from my account. Temporarily pausing the use of credit cards shows what your real cash flow looks like, and it becomes undeniable on what you need to change in the way you spend.

If you find yourself reaching for cards while paying off debt, you can cut them up without closing the accounts, and request a new credit card once your debt is cleared.

Or if you want a more seasonal theme to the pausing your credit card usage, you can literally put them on ice by freezing them in your freezer and thawing them out when your debt is down. It may feel like an inconvenience right now, but you’re future self will thank you for saving hundreds or even thousands of dollars in unnecessary interest payments following you into the future.