Tightening the Belt and Paying Off Holiday Debt:
Now that the holidays have passed it’s time to start paying off holiday debt. This means some post-holiday belt tightening may be in order so we can begin paying down the additional credit card debt we have incurred.
According to Consumer Reports, more than 49 million Americans are still paying off credit card debt from the 2019 holiday season. In spite of this, the 2020 holiday season saw consumers once again reaching for their credit cards and piling on mountains of new credit card debt.
With the holiday season now behind us the after holiday sales are in full swing. Many will consider taking advantage of the savings, choosing to shop at inventory clearance sales, close-out sales, and more.
However, instead of spending even more money that will have to be paid back over time, it’s time to get serious about preparing a plan to get those debts paid down.
Gather All of Your Credit Card Bills:
One way to drive home just how much holiday debt you’ve accumulated is to gather together all of your credit card bills as they start arriving in January and February. There are few things that will make you more aware of how far in debt you are than having all of these bills in one spot and getting a birds-eye view of just how bad the situation really is.
Once you have done this, then it is time to create a chart of accounts. List the card name, interest rate, minimum monthly payment, and balance. You should also make a note of the credit limits on each of your cards as well as note whether the card offers cash-back or other reward features.
Developing Your Plan for Paying Off Holiday Debt:
When you have completed your chart, it’s time to create a plan for paying off holiday debt. The very first step is to put away all of the credit cards except for one that may be used for emergencies. Determine which card is the most beneficial in terms of interest rate and features like cash-back. The remaining cards should be filed away until the balances have been paid in full.
There are several tricks you can use to help you reduce your credit card debt, and this is the best time of year to take a look at all the possible options that are available.
- Tax Reductions – Many of us have forgotten that we’ve been given somewhat of a break on our taxes. Grab one of last year’s pay stubs and see how much “extra” you are bringing home. Put that amount towards your credit card bills.
- Year-end Bonuses – Many people are about to get their year-end bonus, if they haven’t gotten it already. Unless this bonus has been earmarked for another necessary (yes, necessary!) purpose, consider using a significant portion of that bonus for paying off holiday debt.
- Gift Cards and Bonus Cash – Gift cards that were received during the holidays can be sold and gifts that were unneeded or unwanted can be returned to the original store, many times for a cash refund. This can help put a real dent in credit card bills. If you do not have gift receipts, contact the giver if possible, and see if they might have one. Check store policies on returns so you do not miss important return-by dates.
Every person will have to determine what their options are when it comes to paying off holiday debt. In some cases, additional payments may be made by transferring card balances to lower interest rate cards (saving money every month) or by taking advantage of small amounts of unexpected cash from coupon savings, rebate checks, or cash-back checks from other credit cards.
Keep in mind that paying off holiday debt as quickly as possible, means less money you will be wasting on credit card interest. This can mean a savings of hundreds or even thousands of dollars in your total outstanding debt.