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How can I pay down holiday credit debt more quickly?

If you have holiday credit card debt, the main goal is to reduce the burden of credit card debt as quickly as possible. Employing some strategies to reduce credit card debt quickly can make it a less stressful experience that also helps to build your credit history. The first thing to understand is that the only way to handle credit card debt is to face it head-on. Putting it off or pretending that it can somehow get better by ignoring it only makes the problem bigger. 

Many credit card companies offer cards that have low or 0% interest rates on balance transfers. These promotions often provide a good opportunity to transfer the balance from a credit card with a high-interest rate to one with a lower rate, effectively eliminating the interest that may have continued to build on the original account. Most of these cards require that consumers make regular minimum payments, so make sure you don’t miss a payment. These deals typically trigger a substantial penalty in rates when a payment is missed.

Another way to quickly eliminate post-holiday credit card debt is to pay more than the minimum payment. Credit card companies charge interest on your total balance, and these interest rates can be really high. The longer it takes for you to pay the debt, the more that interest accrues. When you pay two or three times the minimum payment each month, or as much of the balance as you can, you make a bigger dent on the principal (the initial amount of money you charged to your card) each time, which helps reduce the total interest and get the debt paid off much more quickly.

Consumers who are homeowners can take advantage of the equity of their home to substantially reduce the amount of credit card debt by borrowing against the value of the home. Using a home equity loan with a low-interest rate to pay off credit cards that have higher rates reduces the overall cost of the debt and helps pay off the total quickly. The downside is that failure to pay the home equity loan can put the homeowner at risk of losing the title to their home if payments are not made.

Is debt consolidation worth considering for holiday credit card debt?

Debt consolidation can be an effective strategy for some consumers to reduce the overall cost of holiday debt by combining high-rate credit card balances into one, consolidated amount, often with a lower interest rate. Many credit agencies offer debt consolidation plans to help consumers refinance debt to ensure the creditors get paid.

Debt consolidation plans are best suited for consumers with a good to very good credit score since these consumers are eligible to get the lowest rates. Poor credit can cause consolidators to offer only higher rate plans, which may not solve the problem for some consumers.

How can I make a plan to pay my credit card debt more quickly?

No matter how much debt you have, how many cards are involved, or how expensive the rates are, you can make a plan to help reduce your debt more quickly.

Start by collecting all credit card statements and identifying the cards with the highest rates. Paying down the amount on the highest cost debt can reduce the overall cost and help get the most expensive cards paid off quickly. This is also a good time to try and identify opportunities for low-interest cards. Transferring balances from high-rate cards to low-rate cards can save you significant amounts in interest.

Next, be sure to pay as much as possible as often as possible. Paying only the minimum amount draws out the amount of time the company is able to charge interest. This results in the debt continuing to grow even as you pay down the amount. If possible, pay more than the minimum with each payment and make payments more often than once a month.

Lastly, familiarize yourself with resources available that outline consumers’ rights and how debt collectors can proceed with collections. It’s a good idea to read up on the Fair Debt Collection Practices Act to fully understand your rights.

Is there a way to ask for more lenient repayment terms if I experienced a job loss or illness?

You can contact your credit card issuer and submit a Hardship Letter to explain your situation. They may be willing to offer you more lenient terms, such as a lower interest rate or a temporary waiver of late fees. Your lender may also have a hardship program that will allow you to temporarily reduce or postpone payments. It may be particularly helpful to include documentation of your job loss or illness along with your Hardship Letter. 

How do I cancel a credit card?

To cancel a credit card, you can contact the issuer of the card either by phone, email, physical mail, or through the issuer's online banking portal. You may need to provide your account information and request that the account be closed in writing. Once you are sure the card has been cancelled, destroy the physical card and check for any automatic payments or subscriptions that have been linked to the card so that you can make appropriate alternative payment arrangements.

How can I avoid post-holiday debt in the future?

The best strategy for reducing post-holiday debt is to plan ahead. While this is often easier said than done, there are tactics you can use to prevent the sticker shock that often happens when the holiday bills come due.

Before buying any gifts, decorations, or holiday groceries, set a realistic budget that ensures important bills like utilities and the mortgage are paid and illustrates exactly how much money is available for the holidays. Once a budget is in place, it is essential to stick to it. Spending too much on the holidays by using credit cards beyond a budgeted amount creates stress and can lead to post-holiday debt. When making that budget, consider how much interest you may have to pay if you cannot pay your entire balance at the end of the billing period.

A great way to reduce the shock of holiday spending is to draw the process out over the course of an entire year. Instead of waiting until Black Friday to scoop up every gift on the list, consider purchasing gifts over the year and storing them away until the holiday season. Buying gifts throughout the year can make the entire process more enjoyable, especially when the holidays roll around and you realize you have bought gifts you forgot about! 

Once credit card debt begins to accumulate, it can quickly snowball into an avalanche. Strive to set a budget for holiday spending and stick to it to avoid accumulating debt. If you do end up with more debt than desired, make a plan to eliminate those debts quickly. 

If you are unsure of how to get started or believe that debt collectors are violating your rights, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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