Every January it hits. All of that holiday gift shopping was fun and hectic, but now the credit card bills have come in, and the process of paying off your holiday debt begins. Unfortunately, for most people, the debt is not paid off before the shopping begins again next year, and the accumulation of continued debt over the years continues. It is time to stop this cycle and get yourself free from your credit card debt and the interest you pay on it.
What are Your Options?
- Make a list of each credit card, the balance owed, and the minimum payment due. Divide the minimum payment into the total balance to get a rough idea of how many months are involved in total payment. Prioritize the cards in order of number of months, the least being #1. Start with the #1 card, and make at least double the minimum payment each month, making only the minimum payment on the others. Any additional money you have each month should go to reduction of card #1. When that card is paid off, go to card #2, dumping all of the money you paid on card #1 plus the minimum payment for card #2. Proceed down the list in this manner until all of your cards are paid off. In most instances, this will take more than a year, because you have debt accumulated from previous years as well, but keep with it.
- Develop a budget that allows you to put some amount in savings each month. The goal here is to have the cash available for next year’s holiday shopping, so that nothing or very little will have to be put on credit cards. This is difficult to do and will require sacrifice while you are chipping away at current credit card debt, but it is critical if you are to break the cycle. Many banks and credit unions have Christmas Clubs, or you can just open a small savings account for this purpose. Vow not to touch this account until it is time for holiday shopping.
- Use your income tax refund responsibly. Instead of purchasing that new furniture or splurging on luxuries, put the tax refund toward paying off your holiday credit card debt or into your holiday savings account for next year. This may be the only year you have to do this – sacrifice now for the later benefit!
- Start next year’s holiday shopping early. This piece of advice is perhaps the most valuable. If you begin to shop in August, you can look for bargains and sales and pay with cash on hand that you will not miss. Instead of going out for dinner or purchasing items you want but do not need, buy a holiday gift instead. There is nothing better than the feeling of wrapping holiday present that you know are completely paid for.