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It’s January, and in spite of the fact that credit card spending was down this holiday season, many people are still looking at some rather unsettling holiday credit card debt.
If you’re one of those people, don’t let it get you down.
First, think of all the rewards you earned on your credit card purchases and smile. Then, breathe, relax, and remember that anyone can get swept up in the giving of the holiday season and overspend a bit — in spite of our best intentions.
I know it happened to me. I intentionally set aside a specific amount in my savings account for the holidays, set a budget — and then promptly blew it with a last-minute, big ticket purchase.
If you’re like me, or if you just intended to use your credit cards this holiday and “worry about it in 2017,” there’s still hope to preserve your credit rating, create a firm financial future, and eliminate your credit card debt from the holidays.
First, you need a plan. Eliminating credit card debt will require discipline in the new year, but you can do it!
Step 1: Trade Rewards in for Cash Back
If you’re like me, you fully intended to charge only what you could afford to pay, and use your credit cards only to garner the rewards points.
Now it’s time to cash them in — for cash back or statement credit, which will immediately go toward that credit card bill.
Don’t even count this toward your minimum payment. This is extra to help you eliminate your debt.
Don’t forget to consolidate rewards on multiple cards, if you can, to maximize your rewards. (Don’t have rewards cards? Skip straight to step 2.)
Step 2: Look at Your Financial Plan
Re-assess your budget for 2017, looking at your bills and any increases you may face on utilities and the like in the new year.
How much do you have available to make credit card payments over the minimum due?
Step 3: Lay it all Out
How much debt are you really looking at? Did you go over-budget by a few hundred dollars on one card, or did you max out every piece of plastic in your wallet?
Either way, you can use a credit card debt reduction calculator to determine how quickly you will be out of debt if you make a specific, consistent payment each month.
You can also go the other way — set a goal for how fast you want to eliminate your holiday debt, and then make consistent payments to achieve that goal.
If you use a Chase card with the Blueprint feature, you can set “minimum” monthly payments to help you pay down your debt faster. As long as you continue to make the bank-required minimums, there are no penalties for not making a Blueprint payment.
You can eliminate debt more quickly by making consistent payments, in essence, treating your credit card debt like an installment loan. Even when your minimum payment drops, continue paying the most that you can afford toward that credit card.
If you’ve got a lot of debt and it feels unmanageable, you might consider the snowball method to eliminate your credit card debt.
List all your credit cards in order, from lowest balance to highest. You pay as much as possible on the lowest balance card, while continuing to make minimum payments on the rest of your cards. When that card’s balance reaches zero, move on to your next highest balance.
Step 4: Look For Opportunities to Consolidate
Try to consolidate your balance to one 0% interest credit card with a balance transfer offer.
Stop using the other cards. Implement the snowball technique with this card and any others with remaining balances. Again, use the debt reduction calculator to determine your consistent monthly payments to get out of debt.
You may want to read this article to decide if a balance transfer is the right choice for you.
Having holiday debt is no crime — it just means you were overly generous this year. But you can manage your credit and take control of your finances in 2017 with a solid plan and the discipline to make more than the monthly payments to get out of debt faster.