Smart Money Moves for Dealing With Holiday Debt

January 17, 2014

High credit card dollar amount of an outstanding credit card balance

Let’s face it – it’s hard to get through the holidays without overspending. For a lot of us, that means relying on credit cards to handle all of the expenses. Come January we’re all looking to get the budget back in line and make some smart moves for the rest of the year. That doesn’t mean you have to cut up your credit cards and swear never to touch them again! There are some smart ways you can continue to use credit wisely, and even come out on top.

Bring Down Holiday Debt

Most of us know that it’s a good idea to pay off our credit card balance every month, before interest kicks in and finance charges increase the debt. But if sit down to look at your bills in January and find that you’ve charge a bit more than you can pay off right away, you’re certainly not alone. There are a couple of ways to deal with this dilemma.

The first is to pay off as much as you can, so that your finance charges come in on a smaller amount. You can then pay off the remaining balance as soon as you are able. In the meantime, it’s best not to use that card if you can avoid it. The goal should be to get that debt paid off as quickly as possible; you want to carry it across as few billing cycles as you can.

The second option is to do a balance transfer. That means applying for a new credit card.

Should You Do a Balance Transfer?

When you’re trying to bring down that credit card debt it seems a bit counter-intuitive to open a new credit card account. It’s not always the right move, but in some cases it’s a good idea.

One of the incentives credit card companies offer to get you to sign up is low or no interest on balance transfers. That means you can bring over debt from another credit card and have more time to pay it off without the interest adding up. There are just a few things you should check before you take advantage of what sounds like a great opportunity.

Before you do a balance transfer, you need to verify things like the interest rate on purchases, whether that rate goes up after an introductory period, and what the rate goes up to on your balance transfer after the promotional period, in case you don’t get it paid off in time. You should also check on any annual or other fees on the new card. Make sure the new card is a better deal for you in the long run over the old card, and not just for the short term while you pay off holiday debt!

Credit Cards With Benefits

When you’re shopping around for a new credit card, whether for a balance transfer or because you’re looking for better terms, there are a lot of potential benefits to choose from. It can get a little confusing, but you can simplify it by determining what you want most from a credit card.

Many credit cards offer some sort of incentive. Some of the common ones are points systems, airline miles, and even cash back on your purchases. You’ll want to choose a card that offers a benefit you’re going to use, so choose wisely. Starting now can mean you could travel for free or have some points or cash to use by the end of the year – which could help your holiday budget when the time comes around again.

Preparing for Next Year Now

Saving up credit card points is a great way to have a little extra money on hand at the end of the year, or to help pay for holiday travel. But that’s not the only way smart credit card use can help.

Using a credit card with a great incentive program to buy holiday gifts early in the year, as long as you pay off your balance each month, can help you be ready ahead of time. It will also mean more points, miles, or cash back to use in the future! The holidays may be a full year away, but smart planning right now can mean you won’t be staring down as much debt next January.