Here we are about a month after Christmas, and the first charge card account bills from the holiday season are starting to arrive. Many consumers are experiencing a little sticker shock at the extent of their overspending. According to Consumer Reports, shopping with charge cards during the holidays often leads to overspending by an average of 16%. This is part of the reason that the same Consumer Reports survey revealed that 13.6 million Americans were still paying off holiday purchases from 2009 in November of 2010.
The cost of charge card account debt is often a hidden expense, particularly for consumers who are juggling multiple charge card accounts. It is easy to overlook the total interest expenses when they are spread across three, five, or even seven credit card accounts.
But credit card interest expenses add up quickly. Having an average monthly balance of $3,000 may not seem like much, but at a 15% APR, it can cost you $450 a year.
Now is the time to assess the situation and make a plan to pay off the debt.
3 to 24 Months: Transfer Your Balance
If you know you can’t realistically do it in two or three months, seek out a credit card that offers a 0% balance transfer. With a balance transfer, you pay a small transaction fee, typically 3%, to move your high-interest debt to a card that charges no interest for anywhere from 12 to 24 months.
During this time of no-interest repayments, all payments you send to the charge card will reduce your debt directly. This will help you pay off the holiday debt faster than sending a minimum payment each month and paying interest all year long.
Balance transfers are a good option for consumers with good credit, but these offers should be used with caution. Refrain from running up new debt when you transfer the balance to a new card — and focus on paying down what you already owe.
The best way to deal with credit card debt after the holidays is not to have any. Many consumers find themselves digging for a credit card during the holidays. However, the consumers that come out ahead are the ones that only spend what they know they can pay off by the end of the month! Remember improper use of credit cards can lead to severe financial hardships including bankruptcy so it is important to use credit cards responsibly even during the holidays!
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