It shouldn't be a surprise that consumer credit counseling agencies see a spike in the number of people seeking help come the first of every year. Every January and February, the there is a 25 percent increase in consumer credit counseling clients across the nation - most seeking assistance recovering from their holiday spending. Robert Manning, senior research fellow at the University of Houston and author of Credit Card Nation: The Consequences of America’s Addiction to Credit, says that the country’s ethics regarding credit have completely changed. Now, not only is debt accepted, but it is encouraged through rewards programs and easy access to substantial credit.
To make sure you start the New Year off on a good financial foot, there are two ways to combat holiday debt: preventative measures and practical repayment.
Preventative Measures:1. Only spend what you have.
Too many people make the huge mistake of using credit as income. Approval for $1,000 more on your credit limit does not equal a $1,000 a month raise in pay! You should only charge items on your credit card that you would be able to pay for in cash. Think of credit cards as a step in the transfer of money, not as a loan until payday.
2. Leave your card at home.
If you are not going out with the intention of making purchases, why not avoid the temptation altogether? If you plan to go to the store and buy a gallon of milk with cash, then, you have no reason to even take your credit card into the store. If you can’t resist the urge to spend, eliminate it!
3. Buy gifts year round.
Breaking news: Christmas comes every single year at the exact same time. That’s right! From Christmas of this year, you have exactly 364 days to prepare for the next round of merry madness. If you know who you are going to buy for year after year, then take advantage of deals throughout the year when they happen. By the next Christmas, you will have saved time, money, and the stress of having so many extra expenditures at one time.
Practical Repayment:
1. Make more than the minimum payment.
Most credit card statements have some indicator of how long it will take you to pay back off your card if you only make minimum payments. When you chose to make only the minimum payments on your credit card bill, your payment is mostly going to interest that has been accrued and not the actual charges that you have made. Making only the minimum payment can lead to a false sense of security and a hole that is only growing deeper and deeper.
2. Focus on the cards with the higher interest rate first.
If you have multiple credit cards with outrageous balances on them, after the minimum payment is made on each card, focus on the cards with the highest interest rate. After that card has been paid off, move on to the card with the next highest interest rate. This method will help you save on accruing interest. If possible, transfer the balance on your higher interest cards to your lower interest cards.
3. Overwhelmed? Speak with an Origin credit counselor!
Here at Origin, we have a team of licensed credit counselors who are here to help you get out of debt and manage you credit score. We will give you expert advice on the best payment methods for your specific situation to get you out of debt faster and on a path toward financial freedom. And, if eligible, you can enter our Debt Management Program to pay off your debts in five years or less.
To learn more about our Debt Management Program, click here or call 843-735-7802!
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