5 Steps to Dig Out of Holiday Debt
It's a holiday leftover many of us carry around for months. It's not Aunt Edna's fruitcake or even those few extra pounds amassed from all the holiday treats. It's the excess credit card debt that comes from spending more than you can afford during the holiday season. Unfortunately, for many Americans, a few festive days of the year can result in mounds of depressing debt that can take months to shed.
If you find yourself with leftover holiday debt, here are some steps you can take:
- Stop the credit storm. If you can't purchase something with cash or your debit card, don't buy it. While it's important to have credit cards for emergencies, it's a good idea to put them on ice until you pay down your debt.
- Start digging out. On your credit card statement is the minimum payment amount you must make each month to cover finance charges. Always pay more than that amount. The more you pay, the faster you will pay down your balance. If you have multiple credit card accounts, focus on paying off the ones with the highest interest rates first.
- Consolidate higher-interest debt. Many credit card companies offer attractive balance transfer offers that come with low teaser rates, allowing you to transfer higher-interest balances to save on interest. Be sure to read the fine print so you know when the introductory rate expires and what the prevailing rate will be. It's also critical to close the accounts from which you transferred the debt. Many people make the mistake of keeping those cards and running up new balances, creating even more debt.
- Minimize your other spending. Take a close look at your monthly budget and see if you can cut your spending in other areas in order to pay more on your credit card debt. If you have the opportunity to make more money, either by picking up more hours at work or getting a second job, consider putting excess funds on your credit card debt.
- Stay the course. While it can be overwhelming to look at the debt you owe, the most important thing you can do is keep making payments. If you keep digging, you're sure to see a clear path toward credit card debt freedom.