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Paying Down Holiday Debt

hospice-fraud-medicare money lawmakers liberal cash debtHoliday overspending is a common reality for many Americans. Unfortunately, realization and consequences often hit in January. Don’t begin the year with panic and regret. The best way to deal with debt is to create a responsible plan to pay it off.  Here are some tips:

  1. Place a spending freeze on non-essentials until debt is paid. This means no new buying. Skip shopping for pleasure to avoid temptations.
  2. Cut back on “extras” such as buying fancy coffee, eating dinner out, and going to the movies. Instead, make coffee at home, eat in, and rent a movie. Remember that this is a temporary phase.
  3. Write down what you owe. Seeing it on paper can help you understand your finances better. It encourages you to be responsible for the problem you created, encourages you to set a budget, and to see what services you can do without. For example, you can temporarily stop premium cable tv, cut wasteful online subscriptions, skip manicures and pedicures, or temporarily stop professional services such as lawn care or professional house cleaning.
  4. Call your credit card companies to ask them to lower your interest rate. You’d be surprised, but sometimes a five-minute call is all it takes to save you hundreds of dollars, so it’s worth a try. Be polite and courteous when asking. If no is the answer, call back a few days later and try again.
  5. Conventional wisdom tells you to pay off your credit card with the highest interest rate first. This can help you save money in the long run. However, in some cases, you may wish to pay off the card with the lowest balance first if it’s smaller as this may psychologically empower you to tackle more debt.
  6. While consolidating debt into one payment may be easier, transfer fees may make it unwise. When considering balance transfers, be sure you read and understand the fine print and watch for hidden fees. If you’re not careful, you can end up spending more in the end.
  7. If possible, pay more than the minimum due. This will help to speed up paying off the loan, thus you’ll save on interest. If you have numerous credit cards, choose one to focus on. Meanwhile continue making minimum payments on the others. Continue this cycle until all cards are paid off.
  8. If you can’t pay more than the minimum due, strive to make minimum payments on a timely basis. If you are having trouble keeping up with that, cut back in other areas or pick up extra work if possible. Your goal is to avoid late fees and problems with your credit score that can lead to higher interest rates. If you absolutely cannot make your minimum payment, call the credit card company to see if you can work out an agreement. In some cases, but not all, the company may be willing to forgive one late payment. If you continue to have problems paying your bills, consider hiring a credit counselor to guide you. For more information on credit counselors, visit: https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor.

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