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Holiday Debt: Tips to Handle Your Credit Card Bills
Posted By Victoria Araj On January 11, 2013 @ 6:50 pm In Credit & Debt,Saving,Smart Shopper | No Comments
Even though Christmas is over, I still have my decorations up. I’ll take them down over the next few weeks, but for now they are a reminder of my favorite time of year.
Know what else is a reminder? The credit card statement that arrived the other day.
Oh the joy of the holidays, and oh the pain of seeing that joy translated into a dollar amount.
I’ll admit, I’m one of those people who pay off the entire balance of my statement each month. I hate owing people money, and I don’t charge anything I can’t afford to pay for – all lessons taught to me by my mother when I was a college student applying for my first credit card.
I understand that not everyone has this approach and may not only be cringing at the sight of their credit card bill, but panicking that it may take months to pay off a debt that only took one holiday to rack up.
I’ve got a few tips to help you assess your debt, prioritize it, attack it, and kiss it goodbye.
Grab a piece of paper or make notes on your favorite device. How much did you charge on each credit card, and what is the interest rate for each?
How much are your regular monthly expenses, such as your mortgage or rent, utilities, food, etc.?
Now that you’ve estimated how much money you’ll need to dish out for your regular monthly expenses, you’ll see how much is left over to put toward your credit card debt.
While you may have made a resolution to save as much money as possible, putting money in your savings account might have to take a back seat until you have this credit card debt eliminated. Consider applying funds from your checking or savings account (only if you have enough saved for emergencies) to help pay down your credit cards.
If you used more than one credit card during the holiday season, rank your cards based on interest rate. You should pay the one with the highest interest rate first. Try to make a large payment on that one while making the minimum payments required on the other cards. Once the card with the highest rate is paid off, you can tackle the next credit card following the same principle until your cards have been paid off.
Make Payments on Time
Don’t be late! You don’t want a late fee do you? If you don’t pay on time, overdue payments will appear on your credit report causing even more problems. Avoid the drama!
Pay More Than the Minimum Payment
If you have a $1000 credit card bill and the minimum payment is $25, you’ll be paying for that super hero action figure until your kid can drive. Always apply more than the minimum payment. Not only will you pay your debt off faster, you’ll be sparing yourself the pain of having to pay interest on money you already don’t have.
Return Unwanted Gifts
If you received a gift that you don’t like, don’t want or will never use, take it back for a refund. If you get the credit back on your card, remember that’s all it is – a credit. You still have to make a payment before the due date. If you get cash back, be disciplined and put that refund toward your bill. If you get store credit, well, buy something you actually like.
Follow a Budget
You already figured out how much you have to spend on regular monthly responsibilities and determined how much you have to put toward your credit card debt. Don’t take on more debt if you can help it. You may have to cut back on eating out, going to the movies or other fun things for a few months, but it beats making the debt you owe larger and feeling like the hole is only getting deeper.
Depending on how much debt you have, if you follow these steps, you should be able to enjoy more financial freedom and start saving again in just a few months. You may have to be more or less aggressive with this plan, and a financial adviser can help you if it seems overwhelming.
Do you have any advice or tips for fellow Zing readers on managing holiday debt?
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