The Holiday Credit Hangover

You had a grand time over the holidays and now you’re about to pay for it. Over the next few weeks, your credit card bills and gift store invoices will let you know just how much you spent having those good times. And while that mountain of debt may seem like too much to handle, credit counselors advise tackling it early and head on. Ignoring or delaying payment on those bills could lower your credit score, which could cripple your attempts to get a car loan or a mortgage down the road.

Don’t try to ease the pain by paying the minimum on your credit card balances, say the credit gurus. That only extends the problem and the added interest payments will wipe out any savings from those holiday bargains you worked so hard to get. Instead, set a deadline date when all holiday debt will be paid off, even if it means paying a lot more than the minimum payment. Tempted by post-holiday sales? Leave your credit card at home and pay cash. Studies show that those who use cash instead of plastic spend about 20% less, in addition to not adding to their credit card debt.

If you’re at a loss to figure out where the extra money to pay off credit card debt will come from, track your spending to find areas where you can cut back. Day-to-day spending like morning coffee and donuts and restaurant meals offer a prime area for savings, but reviewing major expenditures like car insurance can also help. Increasing deductibles or dumping collision coverage on an older car can lower your auto insurance premiums significantly.