How to Dig Out of Holiday Debt

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The holiday season is a wonderful time, but many families charge too much on their credit cards when they buy gifts, throw parties and travel to visit family. That leaves many of us waking up after New Year’s Day to a mountain of credit card debt.

Rather than resign ourselves to paying high interest rates on a large balance for the rest of the year (or longer), cardholders can take some immediate steps to pay off their debt as soon as possible.

1. Consider applying for a card with a 0% APR promotional balance transfer offer.

The first step toward paying down your holiday debt is to minimize or eliminate the the interest payments. There are two ways to do this: The first is to open up a new card with interest-free financing on balance transfers. Competitive cards offer up to 18 months of 0% APR financing on balance transfers and new purchases, most with a 3% balance transfer fee. Currently, the Citi Simplicity Card features an introductory balance transfer APR of then an ongoing APR of .

Another way is to use one of the interest-free “convenience checks” that cardholders often receive in the mail. Just be sure to note what the terms are of the promotional financing being offered. In either case, cardholders should remember that a card issuer rarely will accept a balance transfer between two cards it has issued.

2. Reduce any remaining interest charges.

The most important step in getting out of a hole is to stop digging. Therefore, once you have transferred as much of your debt as possible, you still need to be sure you are not incurring any new interest charges. Stop using your credit cards for regular purchases and switch to cash, checks or debit cards. In this way, you will not add to your existing debt.

If you are unable to transfer all of the outstanding balance from each of your cards, then you need to take steps to minimize the interest charges. You can start by making payments to these cards as soon as you have the money, rather than on the day the bill is due. Because credit card interest is calculated based on the cardholder’s average daily balance, this simple step can dramatically reduce interest charges.

3. Create a plan.

Once you have taken these short-term steps to reduce or eliminate interest charges, it is time to create a plan to pay off your credit card debt entirely. Start by looking for ways to increase your income and decrease your expenses, so that you can make the largest possible payment against your debt each month. Ideally, people who are able to get 0% APR promotional financing should try to create a plan that pays off their entire debt before the financing expires and the standard interest rates apply.

When creating a plan, make sure you use all of the tools available to you. For example, many popular Chase cards have the ability to use their Blueprint program, which contains budgeting and goal-setting tools. In addition, Credit.com offers its own credit card payoff calculator that shows how long it will take cardholders to pay off their balances and lets them input their own interest rates and payment amounts.

Christmas may have come and gone, but for many Americans, the credit card debt will remain. By taking steps now to dig out of holiday debt, you can put yourself on the right path for a happy new year.

At publishing time, the Chase Freedom card was offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for this card.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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