How To Handle The Holiday Hangover Credit Card Debt

Have you received your January credit card bill yet?  Canadians coast to coast to coast are awaiting their first post-holiday credit card statements.  Some of us have little to be concerned about, while others prepare for a long and painful payback process.

The dreaded January credit card bills are typically the largest and most expensive statements of the year for most of us.  Charges for gifts, dinners, and other expenditures connected to the spirit of the season all add up, which can overextend our monthly budgets.  Similar to how we feel after eating a heavy holiday dinner, the January credit card bill brings the pain.

According to TransUnion Canada, one of the largest credit profile services in the country, the average Canadian’s credit card debt will rise by $1,100 over the course of 2014.  Even more alarming, most of that debt is expected to be a result of Boxing Day sales and other holiday promotions.

So how do we keep these expensive bills from ruining our credit scores, or breaking our New Year’s resolutions?  The most important thing to remember is to manage the debt responsibly, and over the long run we can potentially acquire more affordable credit card rates.

Pay Down Debts Appropriately

Obviously we all need to pay off our debts, but we should do so in a way that is in our best financial interests.  Credit cards with higher interest rates should be paid down first to avoid accumulating interest penalties, and extending credit card debt.

Also, remember to stick to the monthly budget.  Debt should be paid off, but it should not take money away from other living expenses like bills, groceries, car payments, and other everyday items.  Set aside an appropriate amount of money to pay down the credit card debt, and stick to that budget.

Handle The Bills On Time

If a payment deadline date is approaching, make sure the money is put through on time.  The last thing you want is to be slapped with a late penalty or other surcharge that increases your debt, and damages your credit score.

If your credit card balance from the holidays has you stretched beyond your means, consider hiding the credit cards in a locked drawer until the balance is paid off.  This way you avoid spending yourself into further debt.

Return Where Appropriate

Sometimes people buy gifts that the recipients already own, or that another loved one is already buying for them.  Don’t just hang onto the gift for another occasion – if it’s not needed now, return the item, and get your money back.  Then use that money to pay off part of your credit card balance.

Similarly, if you received a gift that you are not thrilled about, take it back to the store, and get the cash if possible.  Returning gifts can provide you with extra money to pay down your debt.

Start Thinking Ahead

If your resolution was to save more money or manage your money responsibly, begin thinking ahead to next holiday season right now.  Put money into a savings account, or create a new account specifically to save for the holidays.  Throughout the year, add whatever you can spare into this fund, and then you already have a fully funded holiday budget for next season.

Paying down debt is half of the battle – making sure you don’t end up in more debt is the other half.