The holiday season is a time of joy and celebration, but it often leads to overspending. Racking up credit card debt around the holidays can lead to increased financial stress and can put a damper on your new year. If you’ve spent more than you bargained for this holiday season, establish a plan to tackle that holiday debt as soon as possible. Here are 5 tips to help you get back on track financially:
1. Assess the damage. First and foremost, you should evaluate your debt situation. Review the balance for each of your credit cards and total them up so you have an idea of how much debt you’ll need to pay off.
2. Avoid additional charges. If you want to succeed at paying off your credit cards, you should avoid putting additional charges on them. Refrain from using your credit cards while you work toward your debt repayment goal. Pay with cash or use a debit card instead. This will save you money on additional interest charges and will help you break the habit of spending money you don’t have.
3. Consolidate your debt. If you have multiple credit cards, see if you can transfer the balances of your high-interest cards to the card with the lowest interest rate. You might even consider taking out a new credit card with a low- or no-interest introductory period for this purpose. By consolidating your credit card debt to a card with a low or 0% interest rate, you can save money on interest fees and simplify your debt repayment plan. It’s a lot easier to focus on paying off one credit card than juggling several at the same time.
4. Maximize your monthly payments. Interest charges add up quickly, and if you only make the minimum payment on your card each month, you’ll never be debt free. If you have one credit card, or have consolidated your debt onto one card, put as much money as possible toward your monthly payment until the card is paid off. If you have more than one card, pay the minimum amount on your lower-interest cards and put any extra funds you have toward the highest-interest card each month until it’s paid off. Then, move on to paying off the card with the next-highest interest rate. A credit card payoff calculator can help you understand how long it will take to pay off your cards with different monthly payments.
5. Don’t miss any payments. No matter which of your credit cards you’re currently focused on paying off, remember to never miss a monthly payment. Doing so can lead to expensive late payment fees or a penalty APR. To ensure you never miss a payment, consider setting up automatic payments for your cards.
Paying off debt can help pave the way for a brighter financial future. Not only will it improve your credit score, but it will help you establish smart money habits and bring you closer to your financial goals.