Debt Hangover? 6 Tactics To Pay Off Credit Card Debt Fast

17 Feb Debt Hangover? 6 Tactics To Pay Off Credit Card Debt Fast

http://ift.tt/1OfM2PO Debt Hangover? 6 Tactics To Pay Off Credit Card Debt Fast

how-to-pay-off-holiday-debt-moneyunder30Yes, Christmas 2015 is already a month-ago memory. Hanukah has come and gone. You’ve long since polished off all the leftover turkey and pecan pie. But if you’re like many Americans, one not-so-jolly part of the holidays may still be hanging around over a month later…credit card debt.

The spirit of holiday gift giving is hard to resist, especially once you get in the adrenalized groove of playing Santa. The stats tie it up in a bow: Holiday sales increased 3 percent in 2015 to $626.1 billion, according to the latest tally by the National Retail Federation.

How much of that was paid for via credit cards the NRF doesn’t say. But if you look at those bills, you may wish that St. Nick would make a return visit to your house with a sack of dough. The Federal Reserve reports that as of November 2015—Black Friday/Cyber Monday month—credit card interest rates averaged 13.93 percent.

And while you still might be able to return the gifts you got, you certainly can’t exchange the ones you gave. And look what the Big Bank credit card folks gave you: Unsecured debt. Bah, humbug.

Wondering how you can reverse the tide? Money Under 30 spoke to someone who can identify: Joe Eppy. A millionaire at age 26, Eppy was dead broke by 28—and had to fight his way back. Today, he’s founder and president of The Eppy Group in Ft. Lauderdale, Fla., and his self-styled mission is to educate young adults about financial planning. “It’s really easy to make a lot of money,” he reflects. “The hard part is keeping it.”

Digging out of credit card — acquired during the holidays or otherwise — need not be as painful as, say, squeezing down the chimney. Here are the basics:

DO pay off cards with the highest interest rate first

While it may look tempting to get at the smallest balances first, you’ll want to attack the cards with ridiculously high interest rates, Eppy says, unless you want to still be paying them off come Black Friday 2016.

(There’s some debate on the psychological benefit of paying small balances first, but mathematically, the high APR first method wins.) You can compare the two methods here.

The highest interest rates, which can clock in above 20 percent, typically come on store-issued cards. “Make monthly payments on each and then at the end of the month, put any extra towards whichever has the highest rate,” Eppy says. “Once that is paid off, focus on the card with the second highest interest and repeat the process until all debts are paid.”

DO ask your credit card company for a lower rate

Eppy points out that one place to look for extra savings is within all your current credit accounts. “If you have additional loans, such as car payments, contact the loaner and ask for a lower interest rate,” he says. “Well-qualified borrowers can request to refinance a credit payment once every six to 12 months. This will help put some extra savings in your bank account that you can use towards paying off holiday debt.”

CONSIDER transferring your balances to cards with lower rates

We’re expanding on Eppy’s first two tips to offer this one. Though the Federal Reserve just raised interest rates in December after its seven-year stimulus campaign, you can still take advantage of low-interest credit-card balance transfers.

Some cards offer 0 percent interest for a limited time, which means every dollar you pump into payments reduces your balance by the exact same amount. (Typically, this comes after paying a one-time balance transfer fee—typically 3 percent of the amount transferred, but there are exceptions, like the Chase Slate credit card, which has an introductory $0 balance transfer fee on balances transferred in the first 60 days.) If you’re getting those offers in the mail, don’t throw them out: Use them. But be sure to schedule payments well ahead of the due date, as one late payment can wipe out the special rate.

See how much you might be able to save with our balance transfer calculator.

CONSIDER consolidating with a personal loan

If you have too much credit card debt to repay within 12-to-20 months — the period some credit cards will float you a 0 percent APR — you might look into consolidating your credit card debt with a personal loan.

If your credit is healthy, you may qualify for a personal loan of up to $35,000 that comes with fixed monthly payments over either three or five years. And if your credit is excellent, you might even snag your loan at a much lower interest rate than your average credit card.

Learn more and compare some of our recommended personal loans here.

DO pause unused monthly subscriptions

Which monthly services haven’t you used in almost a year? “Whether it’s the gym you rarely get to or the extra channels that you never watch, there are probably some subscriptions you currently have that you could do without,” Eppy says. If you’re worried about early termination fees, contact the company and see if you can freeze your account and pay a minimum balance. “Once you get caught up on holiday debt, you can reactivate your monthly subscriptions without any issues.”

Services like Trim and Truebill can also help you sort through your unneeded subscriptions.

DON’T keep dining out and overspending

December means lots of holiday parties, which often leads to more eating out. A hectic work day means lunch at the nearest food court. And who wants to fix dinner when you can call for takeout? If that’s you, consider breaking those habits now. “By bringing your lunch to work and eating homemade meals for dinner, you can save [at least] $50 a week,” Eppy says. “Once your debt from the holidays is paid off, you can go back to indulging in takeout meals.”

Finally, be kind to yourself. Once Black Friday hits, it’s too easy to get swept up in a blizzard of product ads and the flurry of rabid shoppers. Hopefully, this season marks your first slip on the ice, so getting up and correcting course shouldn’t be worrisome.

But if it’s not you first time down this path, then take pause. Think for a moment about your most important financial goals. Did all that spending get you any closer? Or, more likely, further away?

Now, make a post-holiday date with yourself to get the help you need: whether from a financial advisor, planner—even, if need be, a counselor or a group that can help you address compulsive spending. (Many metro areas have active chapters of Debtors Anonymous.)

With the 2015 giving all done, now’s the ideal time to give something valuable back to yourself: Financial stability. And if you want to be in our debt, so much the better.

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