Holiday bills from shopping and traveling can be unfortunate reminders of the holidays after the lights and trimmings are packed away. Credit card balances can carry 25 percent or higher interest rates, taking big bites out of your income.
Don’t let a post-holiday credit card hangover ruin your peace of mind. It’s time to develop a plan to pay off gift-giving and travel bills so they don’t overwhelm your budget. Here are steps that will help whittle down holiday debt:
Make a payment plan — and stick to it
The first step to getting out of debt is to stop digging. Here’s how:
Commit to only purchasing necessities for a month, suggests Michelle Singletary, Washington Post and nationally syndicated personal finance columnist.
Pay credit card bills on time. Late charges of $40 or more add insult to injury. Don’t fork over any extra by forgetting to make a payment.
Pay at least double the minimum required payment each month or more whenever possible. Many cards come with high interest rates and only paying the minimum due will cause you to pay more in interest and extend the term of your debt.
Transfer balances from high interest accounts
You may have the option to move high interest rate credit-card debt to a lower interest account.
Cardholders with good credit scores often receive offers for low or no interest rates for up to a year when they transfer balances from another card. These offers usually carry a fee of a few percent. Transferring a $5,000 balance to another account with a 3 percent transfer fee would cost $150. If that gets you 0 percent interest for a year, it may well be worth it if you can pay off the balance over that period.
Home equity loans and lines of credit typically have much lower interest rates than credit cards. Paying off high interest balances with lower interest accounts can save hundreds over a year. Ensure you budget money to pay off the debt after transferring it.
brewing coffee at home for the commute instead of stopping at a coffee shop
bringing your lunch to work
substituting video rentals for trips to the movie theater
visiting the library to borrow the latest books and magazines.
Many people receive an income tax refund come spring (see tax planning tips). Instead of spending that money, use your refund to reduce debt.
Commit to finding an extra $20 per week for the remainder of the year to put toward debt reduction. Singletary suggests keeping a spending journal for a month — write down how much you spend on different items to see where you can cut back.
Whittle Down Holiday Bills
By Peter Fabris
Holiday bills from shopping and traveling can be unfortunate reminders of the holidays after the lights and trimmings are packed away. Credit card balances can carry 25 percent or higher interest rates, taking big bites out of your income.
Don’t let a post-holiday credit card hangover ruin your peace of mind. It’s time to develop a plan to pay off gift-giving and travel bills so they don’t overwhelm your budget. Here are steps that will help whittle down holiday debt:
Make a payment plan — and stick to it
The first step to getting out of debt is to stop digging. Here’s how:
Transfer balances from high interest accounts
You may have the option to move high interest rate credit-card debt to a lower interest account.
Chip away steadily at debt
Possible areas for savings include:
Many people receive an income tax refund come spring (see tax planning tips). Instead of spending that money, use your refund to reduce debt.
Commit to finding an extra $20 per week for the remainder of the year to put toward debt reduction. Singletary suggests keeping a spending journal for a month — write down how much you spend on different items to see where you can cut back.