The new year is a great time for new beginnings, but if your holiday spending was a little over the top, starting fresh financially may have to wait until the credit card debt is paid. Check out these tips to bounce back from the holiday bills as quickly as possible and make a debt-free lifestyle your most important new year’s resolution.
Find Out Where You Stand
Come January, it’s tempting to avoid the mailbox or to leave the credit card bills unopened on the table, but ignoring the problem certainly won’t make it go away. Open the bills as soon as possible to find out exactly where you stand. Review each item to make sure there aren’t any mistakes, such as purchases you didn’t make or items you returned that haven’t been credited.
Make a Plan
With your credit card bills in hand, request copies of your free credit reports. You’re entitled to one free credit report, each year, from each of the three major credit bureaus. These can be used to review your debts and payment history for paying your bills on time. Use all of this information to write down a plan for paying off the bills as quickly as possible, rather than just making the minimum payments.
Put Your Cards Away
Avoid spending on splurges while you’re paying off your credit cards. In fact, consider locking them away until you get them paid off. Here’s a mental exercise to help ensure you don’t splurge on things that you don’t need. Look at the interest rate you’re paying on your credit card. If that rate is 20 percent, then every $1,000 spent will cost you another $200 by the end of the year. That’s money that could go toward paying off debt instead.
Consolidate Your Debts
For many Americans, holiday expenses are just the tip of an entire iceberg of credit card debt. In fact, the average American household in 2015 had $7,813 on their cards. If you have a lot of credit card debt, it may be hard to pay it off quickly. If this is the case, you may be able to get some relief by consolidating into a personal loan with a lower rate.
If you don’t qualify for a personal loan, check out the interest rates of competing cards. Many credit cards offer reduced interest rates, a zero-interest grace period or other relief when you transfer a balance from another card.
Leverage Your Tax Return
If you expect a check from the IRS after filing your tax return this year, use that money to take a bite out of your credit card bills. In this case, file your taxes as soon as possible, rather than waiting for the April 15th deadline. If you can get your taxes done in March, or even earlier, you should get your check earlier and save an extra month or two’s worth of credit card interest.