The holiday season has to come to an end, and for many consumers the New Year brings credit card statements reminding you of the gifts and other purchases you made for the holidays. If you racked up credit card debt when holiday shopping this year, have no fear, we will give you a few tips on how to pay off your credit cards. Setting up a plan can keep holiday credit card debt from going deep into 2014.
- Get Organized – Collect your statements and see just how much you owe. In order to set up a plan to pay off debt, it’s important to know exactly how much you need to pay back.
- Budget Time – If you have a budget, take a good look at it and see why you fell into debt. If you still don’t have a budget, it’s time to establish one that works for you and your family. One thing to try when setting up or trying to adjust a budget is to track your expenses for an entire month.
- Adjust Your Budget – If you are falling behind every month, take a look at your budget and see where you can make cuts, whether it’s the small expenses or a large fixed expense. If you previously did not have a credit card payment or if your payment will increase, add the new payment amount to your budget.
- Do the Math – Look at a credit card debt calculator and find out how long paying the debt will take and how much you will pay in interest. If you have never used a credit card debt calculator, watch some of the videos in our credit card debt calculator series. Understand the benefits of fixed credit card payments, how to calculate your APRs, and why making minimum payments can lead to years of financial hardships.
- Set Your Goals – Establish goals for paying off your debts. If your debt is just from the recent holiday season, paying it off could be a short-term goal. If your debt has been building up for some time or an unexpected expense has increased your debt drastically, your goal may be a long-term one.
- Interest Rates – If your interest rates are high, make sure you look into all of your options to pay back debt. Contact your credit card companies and see if you can have those interest rates lowered or look into other options. Lower interest rates will always save you money and time when paying off debt.
- Pay Extra – This is, of course, easier said than done. If you have extra funds at the end of a month, send an extra payment to your creditors. Sending extra payments can go a long way towards paying off debt early and can save you even more in finance charges. Every extra payment that you send will go directly towards the principal still owed on the account. Paying down the principal will mean less interest paid for every month thereafter.
- Monitor Your Progress – It’s important to monitor all of your accounts every month. Making payments is just one part of the equation; you should always open your statements or check your account online. Monitoring accounts will allow you to be sure that your payments are posting and your interest rates have not increased.
- Don’t “Rob Peter to Pay Paul” – No matter how desperate you are to pay the bills, don’t raid your retirement funds, take out a payday loan, and/ or prioritize credit card bills over necessities, such as paying the rent and keeping the lights on.
- Begin Planning for Next Holiday Season – One thing about paying off debts and how much we hate it is we can do something about it. It just takes a little planning. In earlier tips, we discuss adjusting your budget. Do the same thing by planning for gifts and setting aside cash for those purchases prior to “Black Friday.”
Regardless if your credit card debt is just a hangover of your holiday shopping and a few hundred dollars or has been building for years to thousands of dollars, paying it off as soon as possible will relieve stress and save you money in the long-run. Use free tools, like our credit card debt calculator, to help you set up a plan and pay off your debts as soon as possible, with the least amount of finance charges. Don’t get discouraged, stick to your plan and become debt-free!
