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Smart Ways to Overcome Holiday Debt

ImageFor many, getting in debt over the holidays is unavoidable. If you are one of the many American consumers who put one (or five) too many holiday purchases on a credit card, you don’t have to let your spending hangover ruin the New Year. Now is the perfect time to put together a plan to pay off that debt as quickly as possible. Here are some tips to effectively deal with that holiday debt.

Size the breadbox. First, you must get a handle on just how big a hole you’ve dug. Create a comprehensive list of all the debt you accumulated just over the holiday season. Review all your credit card statements and calculate how much you spent on decorations, gifts, events, dining, entertaining, and other holiday-related expenses. Knowing this total figure can help you set reasonable goals for paying it off.

Develop a payoff plan. Take a good look at your budget and ask yourself how much you can realistically set aside each month specifically for credit card payments. Remember, in order to make a dent in your debt, you must pay more than the minimum payment each month. If you can’t see yourself paying more than the minimum, start cutting back elsewhere to free up some money – cut back on cable channels, scale back your cell phone package, or perhaps eat out less. Remember, a few temporary cutbacks now will help you pay down your debt faster.

Consolidate your credit card debt. Take advantage of 0% Annual Percentage Rate (APR) transfer credit cards to reduce total interest payments on the debt you’ve accumulated. If you can’t pay off the full amount of your holiday debt within the next couple of months, spread it out over six or twelve months at a 0% APR. Just be sure you understand what the interest rate will become after the promotional period is over so you don’t end up paying back all you’ve saved with a ridiculously high interest rate.

Stop using your credit cards. Everyone in your household has to stop using credit cards for day-to-day purchases. Period. So, make sure family members who share credit card accounts understand this.

Find income elsewhere. If you are truly motivated to eliminate that holiday debt as quickly as possible, you could look for another income stream. Think about taking on a part-time job. Perhaps you can create a side business out of a hobby. Or, you may even consider selling some personal items on auction websites to generate some quick cash to pay off that debt well before the next holiday season.

Use bonus money to pay off debt. If you have recently received a holiday bonus — or you are filing your taxes early and are getting a refund — use that extra money to reduce your holiday debt as soon as possible.

Whatever you do, don’t simply carry this burden on into the next holiday season and repeat the whole cycle. Take care of the holiday debt you’ve accumulated now and make the 2013 a year with fewer financial anxieties.


This information is compiled courtesy of West Community Credit Union in O’Fallon, Brentwood and Kirkwood. For more information, contact us at (636) 720-2400.

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