Anticipate Your Vacation Debt With A Repayment Plan Personal finance
Your best way to pay off vacation debt depends on your cash flow, credit rating, and personal preferences. Here are just a few:
Pay the full balance with the first statement
If you have the cash, this is the fastest way to pay off debt – and the cheapest, because you avoid paying interest. According to the NerdWallet Shopping Survey, 35% of vacation buyers who added credit card debt in 2019 took this approach.
Snowball or trigger an avalanche
The “debt snowball” and “debt avalanche” are two popular methods of paying off debt. What is right for you depends on your financial priorities.
With the debt snowball method, you focus on paying off the smaller balance first, and then transfer the amount you paid on that first debt to the next. The amount you pay on targeted debt keeps increasing, like a snowball going downhill. You can choose this if you need the first few wins by paying the first accounts to stay motivated.
The debt avalanche method may be best if you want to pay as little interest as possible. With this route, you prioritize paying off debt with the highest interest rate, regardless of the size of the balance. Again, when that first debt is settled, you put the amount you paid on it into the next highest interest account, repeating until you are debt free.