By Himank Bhatia on February 11, 2026 Estimated reading time: 9 minutes
Holiday debt hangover: How to get your finances back on track
By Himank Bhatia on February 11, 2026 Estimated reading time: 9 minutes
Many Canadians start the year with credit card debt and stretched budgets. Learn practical strategies to manage holiday debt, prioritize payments, and regain financial control.
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After the holidays wrap up, many Canadians are left dealing with what’s often called a “holiday debt hangover.” It’s that uneasy feeling in January when the celebrations are over, but the credit card bills loom.
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Recent surveys show a growing number of Canadians carry holiday-related debt into the new year and feel more financial pressure because of it. In this article, we’ll explain what’s behind this holiday hangover, why this type of debt has become so common, and provide practical steps to pay it down so you can get your finances back on track.
The state of holiday spending & debt in Canada
According to Spergel’s latest Financial Hangover survey, about half of Canadians (51%) carried new holiday debt into 2026, and nearly three in 10 are starting the year with over $6,000 in holiday-related balances. At the same time, 75% report feeling more financially stressed than in past years, and nearly one in five expect to fall behind on credit card payments.
“These figures show how easily seasonal spending can morph into a long-term debt trap when you’re dealing with 19.99% or 29.99% APR. That ‘hangover’ doesn’t just go away, it grows,” says Ronique Saunders, Credit Canada Credit Counsellor. According to Spergel’s survey, nearly one in three Canadians say it will take six months or longer to recover financially from holiday spending.
These impacts go beyond numbers on a statement. Carrying high balances increases your credit utilization, which can hurt your credit score and make future borrowing more expensive. High balances also trigger significant interest charges and monthly interest expenses, which can quickly drain your cash flow and increase the total amount you owe. And seeing a large balance month after month adds emotional stress, making it harder to save or plan for the rest of the year.
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Many Canadians carry holiday debt into the new year because of a few common money habits. One is present bias—focusing on enjoyment now and pushing costs into the future. Another is optimism bias—expecting finances to recover without a clear plan. These habits are normal, but they can cause debt to stick around longer than expected, especially as credit card interest adds up.
Step-by-step financial recovery strategies
Understanding how common this “holiday hangover” is—and taking steps to tackle your debt—can help you regain control of your money and reduce both financial and emotional stress as the year begins. Here’s how to get started.
1. Assess your current situation
The first step to getting back on track is to figure out where your money stands. Pull out your January credit card and bank statements and tally up any holiday debt. Seeing the numbers in detail provides a foundation for every decision that follows.
A helpful way to start is by creating a “financial photograph.” This is a snapshot of your finances at a specific point in time, showing what you own versus what you owe. To create a financial photograph, use a piece of paper or a spreadsheet and list everything you own (savings, investments, maybe a home) and then subtract what you owe, such as credit card balances or loans. This will give you a clear picture of your net worth, separate from your everyday budget.
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“Understanding your complete financial situation allows you to identify, organize, and create a realistic plan to pay off what you owe,” says Saunders.
2. Create a realistic 2026 budget
Consider your budget a spending roadmap for the year ahead, taking into account a plan to reduce your holiday hangover debt. When creating a budget, you can use a budgeting app, spreadsheet or a simple piece of paper to list your income and expenses—including debt payments. Determine how much money you have to spend each month and compare it with how much you pay for various bills and items during that same period. This will help you identify where you can cut back. Those savings can then be directed to your debt so you can pay it off sooner.
The goal is to allocate as much as you reasonably can towards the debt while still covering your necessary expenses. “A realistic 2026 budget doesn’t need to feel restrictive—it should simply reflect your values, priorities, and financial goals for the year ahead,” says Saunders.
3. Prioritize high-interest balances
Once you have a budget in place, you can analyze your cash flow to determine the best debt repayment strategy. Keep in mind that not all debt costs the same. Credit cards usually carry the highest interest rates, so paying them down first saves the most money over time.
Two common repayment strategies are the snowball and avalanche methods. The snowball method focuses on paying off your smallest balances first, giving you quick wins that build momentum. The avalanche method focuses on the highest-interest balances first, which reduces the total interest you pay and can shorten the overall repayment period.
Counsellor Tip: If your interest rates are over 20%, the avalanche method is almost always the better choice to stop the “bleeding” of your monthly income.
4. Increase cash flow
Boosting the money you have available can speed up your holiday recovery. Look for temporary ways to earn extra income, such as freelance work, part-time jobs, or selling items you no longer use. You can also free up cash by reviewing subscriptions or non-essential spending and redirecting that money towards debt repayment.
5. Pay more than the minimum
Minimum payments may feel manageable, but they keep you in debt longer and increase the total interest you pay. Whenever possible, aim to pay a larger portion of your balance—as much as your budget allows.
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Adding even a little extra each month can shorten your repayment timeline by months and save you hundreds in interest, by paying even $50 above the minimum payment you reduce the principal which creates a compounding effect in your favour
6. Use balance transfer or lower-rate options carefully
If you have high-interest debt, a balance transfer or personal loan could help. Balance transfers often come with low or zero introductory interest rates and work best for short-term payoff plans. Personal loans can be a better option for larger balances that need more structure and time to repay. Always check the fees and rates after the promotional period, in addition to the repayment terms.
Without careful planning, these options can cost more in the long run, so make sure they fit your timeline and budget.
Take time to reflect on what triggered your overspending during the holidays. Did social pressure or impulse purchases play a role? Understanding the habits that led to overspending can help you make better financial decisions in the future and prevent similar situations.
“Holiday overspending is often driven by emotion rather than intention, which is why reflecting on what triggered it is so important for future planning,” says Saunders.
8. Build/replenish an emergency fund
Even a small emergency fund can prevent future reliance on credit cards for unexpected expenses. Start with a target of $500 to $1,000, and treat contributions as a priority alongside debt repayment. This safety net provides peace of mind and helps protect the progress you’re making in managing debt.
9. Seek professional support early
If your debt feels overwhelming, contact a professional for support. Non-profit credit counselling agencies, like Credit Canada, provide free financial guidance for creating a repayment plan and developing strategies to manage spending. Our Certified Credit Counsellors provide judgement-free, personalized advice and access to free budgeting tools and resources, including debt calculators, expense trackers, and educational webinars.
“If you are using one credit card or LOC to pay off another, it might be time to speak to a credit counsellor. We can explore options such as debt management plans, that can stop interest entirely and help you get back on track,” says Saunders.
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The right time for a financial reset
Starting the year with holiday debt doesn’t mean you failed. For many Canadians, it’s simply part of how the season works. However, this is an opportunity to reset.
You don’t need an overly aggressive plan to see progress—setting realistic expectations and aiming for small wins can be more effective in the long run. Paying more than the minimum, cutting back in one area, or skipping non-essential spending for a few weeks can help you regain control. These small steps reduce stress, build confidence in your financial decisions, and make it easier to stay on track as the year gets underway.
If you need advice, reach out to a non-profit credit counselling agency like Credit Canada. We can help you understand your finances and make informed decisions about handling debt. Contact us today to speak to a certified credit counsellor.
FAQs
How long it takes to pay off holiday credit card debt depends mainly on three things: how much you owe, your interest rate, and how you tackle repayment. A larger balance and higher interest rate means more of your payment goes to interest, slowing progress. Paying only the minimum can stretch repayment over months, while paying extra using the snowball method or the avalanche method can help you get out of debt faster.
A balance transfer can make sense if you have good credit and qualify for a promotional rate as it can save you interest; however, you need to have a clear plan to pay off the balance before the promotional period ends. Once it does, transfer fees apply and any remaining balance will jump to a higher rate. Make sure to read the fine print. A personal loan may be another option if you want predictable monthly payments and a fixed timeline, especially if your credit card rates are high and you’re struggling to make progress.
The best way to avoid overspending next holiday season is to plan early by setting a realistic holiday budget and saving a little each month in a separate account. Set gift-giving limits, look for deals ahead of time, and remind yourself that meaningful celebrations don’t require expensive gifts. Sticking to a plan can help you enjoy the holidays without the financial stress come January.
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