Quick Money Tip: 5 Steps to Paying Off Holiday Debt
So, you saved up, created a holiday budget, gave affordable gifts, and celebrated the season frugally, but you still ended up with far more holiday debt than you'd like. It's no fun to kick off a New Year with financial stress, feeling totally broke. Here are some ways you can get rid of that December debt as quickly as possible.
1. Determine How Much Debt You've Got
First and foremost, you've got to calculate just how much debt you've gotten into as a result of holiday expenses. It might get ugly. It might get stressful. But don't get discouraged, you can take care of it!
Add up all of the balances on your credit card statements and figure out the interest rate on each of them. In all of the holiday shopping chaos, it's easy to forget just when, where, and for how much we swipe our plastic. If you took out a loan for the holidays, determine how much you owe on that (including interest.)
2. Negotiate Rates + Transfer Balances
Debt can get pretty hefty on its own, but what makes it so expensive is the added interest. Take some time to contact your credit card companies and/or financial institution and ask if they can lower the interest rate on your card. You'll be surprised at how easily some companies will dish out the favor. Take note that you might have to request to speak with a supervisor to get things moving.
If you strike out in getting your interest rates lowered, then consider transferring your debts with higher interest onto a credit card with the lowest rate. These are typically referred to as balance transfer cards, with rates ranging from 0 to 5% for short periods of time (about 6 months) and will save you money in interest.
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3. Consolidate Debt
Additionally, consider consolidating your loans and other debts (holiday or not) by reaching out to a financial institution offering lower rates. By combining all of your debts into one loan, it'll save both time and money, since you'll only have to make one monthly payment, for multiple debts, and likely score a lower interest rate for each, reducing the amount you'll owe over time.
4. Make MORE Than Minimum Payments
If you want to save on the amount you'll pay in interest, then work hard to pay your debts off more quickly. By making more than the minimum payment, you'll get rid of your debt sooner and pay less for doing so! This might mean living extra frugally for a period of time in order to have some extra cash leftover when bills are due, or finding creative ways to supplement your income.
Even if you can only contribute a small, extra amount each month, do so. Consider putting your holiday bonus, tax refund, or Christmas money toward holiday debt payments.
5. Think Big, Then Small
By this, we mean really focusing on the credit card with the highest interest rate since it's likely the one costing you the most. The sooner you pay off its balance, the less you'll owe in interest. Once that card is taken care of, take whatever amount you were paying on it and direct it toward the card with the second highest interest rate, and so on and so fort, until they're all paid off!
Of course, the best thing you can do to help pay off your holiday debt as quickly as possible is to take steps to prevent it. It's never too early to create a holiday budget, save up, and save money on holiday gifts, get-togethers, and travel - start planning ahead for next year!