3 Tips for Recovering from Over-Zealous Holiday Spending

It’s no surprise that hoards of people every year dig themselves deeper into debt during the holiday shopping season – perhaps even you. You’re surrounded by flashy advertisements and limited sales designed to put on pressure - both in the urgency of how quickly the holidays are approaching, and in trying to solicit a sense of guilt if you don’t spend enough or buy the most coveted items for those on your gift list.

This pressure and sense of urgency have helped to make credit cards the holiday shopper’s best friend, where buyers like you can take a “buy now, pay later” approach to gift-giving. Despite their convenience, problems can arise if you buy too much and can’t afford to pay off those credit card bills, leading to high interest payments. It’s not uncommon for some shoppers to spend most of the next year paying off the previous year’s holiday gifts, paying them off just in time to repeat the process once again. You don’t have to be one of them.

It’s easy to say that you shouldn’t use credit cards when shopping for gifts unless you can pay them off in full at the end of the month. It’s also easy to say you should start saving early for a cash-funded Christmas. But what if it’s too late for that this year, and you’ve already run up credit card debt? What can you do to recover from over-indulgent credit-based Christmas shopping, if you’ve already maxed out your credit cards?

Here are three things you can do after your holiday shopping is complete to lessen the burden of your credit card debt:

1. Consolidate Debts – If you used multiple credit cards or other interest-based financing options for your holiday spending, consider consolidating them into one larger loan or credit card balance with a more favourable interest rate. You’ll save money on interest charges, and can make one monthly payment instead of many.

2. Transfer Credit Card Balances – Even if consolidating your credit card balances isn’t an option, you may be able transfer your balances to one (or more) low or no interest credit card like the Emirates Citibank Platinum credit card which offers 3.9% p.a. interest rates for life on balance transfers to those who qualify. Other cards may offer 0% interest rates for a more limited time, before a higher interest rate kicks in – if you choose that option, be sure to work out a budget that allows you to pay off the balance in full before you start accumulating interest at the higher rate.

3. Start Budgeting – Whether you opt to pay off your existing cards, transfer your balances, or consolidate credit card debts, it’s important to take a good look at your expenses. Work on ways to cut your budget to allow yourself to pay off as much as possible before any grace periods expire (even if you can’t pay off the balance in full). Reducing your principal balance faster means you’ll pay off the debt quicker and pay less interest in the long run.

No matter what approach you choose to manage your holiday-induced debt, remember that paying off credit cards sooner means you can put money that would otherwise keep going to credit card payments aside as savings for next year’s holiday shopping, without having to pull out the plastic.

Article correct at its author date: December 2008. Copyright Virtual Office Space, Any unauthorised reproduction of this article will be prosecuted to the full extent of the law. Credit Cards Australia.

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