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Get a handle on holiday debt

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POSTED: December 1, 2010 10:50 a.m.

Overheard in a mall when a weary child asked his package-laden mother: “Mom, can we stop shopping yet?”
Smart kid.
Is your holiday shopping completed? Did you stick to your budget and use saved cash, or are you afraid to look at the stack of credit-card receipts you’ve accumulated?
If you’ve reached the end of your budgeted money, yes, you can stop shopping. Don’t buy another thing, even if you see a super sale.
If you used credit cards because you didn’t save in advance, you’ll need a plan of attack to pay off the balance.
Your first step will be to determine whether your credit-card purchases put your balance over 50 percent of your available credit. Going over that 50 percent amount can impact your credit score long term. If that has happened, do everything you can to immediately bring the balance below that 50 percent. Consider taking out a lower interest loan, perhaps at a credit union, to pay off the entire balance. If you’re expecting a tax refund and haven’t paid off the credit card by the time the check arrives, use it first to pay off the debt.
If you’ve stayed under that 50 percent amount, break the balance into three payments and pay it off quickly. If you can’t clear the balance in three payments, at least make more than the minimum payment. There’s a place on your credit report that indicates whether you make more than the minimum payments, and that helps your credit score.
If your credit card statement after the holidays offers you a month of no payment, send a payment anyway. The interest meter never stops running, and the cost of your gifts will continue to rise.
If you haven’t started your shopping yet, reconsider how much you’ll spend. Decide whether it’s possible to go all-cash this year, perhaps by not sending gifts to people outside your immediate family.
Idea: Start a Christmas Club account at your bank or credit union for next year. Every month you’ll deposit a set amount, and by the next shopping season all of your holiday money will be waiting for you. The interest paid will be minimal, but you’ll have the satisfaction of having no credit-card debt after the holidays.

 

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