Digging your way out of holiday credit card debt

8:55 AM, Jan 2, 2014   |    comments
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WASHINGTON (WUSA9) -- The holidays are behind us so here come the credit card bills. Time to pay the piper.

Gerri Walsh, President of the FINRA Investor Education Foundation, shared a smart strategy for digging out of credit card debt. 

"If you have credit card debt this time of year, you're absolutely not alone. About 35% of people in a survey of 25,000 U.S. adults told the foundation that they have credit card debt but you can get yourself out," said Walsh.

Walsh suggested a first step: "The very first thing you should do is do a personal financial inventory so you know how you got into credit card debt, to know what you have to pay off. You really need to know what you bough,  so what do you own, what do you owe, and then get set on a strategy.

"The very first thing you should do is put away the plastic. Carry cash. That way you know you have a limit on what you can spend and call your creditors before you skip a payment because if you are in trouble, especially with the holidays and all the big spending that we do, your creditors may give you repayment terms that are easier and better on your credit than if you skip a payment."

Which bills do we attack first? "The ones that have the highest interest rate charges because every dime that you're paying in interest will compound if you don't pay off that debt in full and on time. So make sure that you know what the interest rates are on each of the cards and then pay off the one that has the highest interest rate first. So make sure that you're paying at least the minimum on all your other cards so that you're not incurring additional finance charges," said Walsh.

If you're possibly looking at these interest rates, should you consider moving all of your debt on to one of those zero percent offers or should you be a little cautious of those types of moves? 

Walsh says, "Comparison shop before you take that move because some of the consolidation offers are a good way for people to get rid of their debt but for other they put the inevitable further down the field and extend the period of time where they're paying and they're still paying relatively high interest rates. So comparison shop on terms and make sure that if there's a penalty for early payment, you avoid that offer all together because the best bet is to get a grip on your debt, pay off as much as you can, but ultimately when you have enough cash, pay it down to zero."

 

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