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The 1st day of credit: Reality

By Janna Herron ·
Thursday, December 26, 2013
Posted: 8 am ET

As you rush to get that last stocking stuffer before the stores close for Christmas Eve, it may dawn on you that you're way over budget this year, despite the best of intentions. And you're in good company.

Half of Americans expected to stay within their holiday budgets, according to a recent survey from Capital One. U.S. consumers typically charge 40 percent more on their credit cards in December than in an average month, according to recent TransUnion data. One in 5 consumers spends twice as much.

But the reality is this: After opening presents and drinking and eating with family, a looming credit card debt remains. What to do?

Here's a five-pronged plan to whittle those balances as quickly as possible, so the New Year can be started debt-free, or at least nearly debt-free.

  1. Put the card on ice: On Dec. 26, like Santa, your card is taking a vacation. Don't add new charges until you get the old ones taken care of.
  2. Use gift money: I hate to be a Grinch, but whatever cash you got in your stocking should go to paying down your credit card debt before buying something fun. Instead of pocketing money, you'll be getting peace of mind.
  3. Prioritize debts: If your credit card debt is spread across several cards, attack the ones with the highest balances and highest interest rates first. That means the store credit cards because these typically carry annual percentage rates, or APRs, in the 20s. On the rest of the balances, pay more than the minimum to reduce how much interest builds up.
  4. Make extra payments: Instead of waiting until the end of the month to pay your bills, pay them every other week. That way, you don't have a chance to spend money earmarked for bills on something frivolous.
  5. Cash in rewards: Put all that holiday shopping to good use. If you have a rewards credit card, cash in some of your points or miles for a statement credit.

How are you planning to pay off holiday debt?

Follow me on Twitter: @JannaHerron.

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