March 29, 2024

What to Do if You Overspent During the Holidays

In that case (and in keeping with the frosty theme), we recommend snowballing your debt payments. Rather than paying down the balance with the highest interest rate, attack your lowest balance first. The good cheer that comes from that accomplishment will give you the necessary positive momentum to go after your next-largest debt.

You should also call your issuers and request a lower interest rate. This tactic may seem a bit on the nose, but it can be surprisingly successful — a 2018 survey by CreditCards.com found that 56 percent of people who asked for a lower interest rate got one. However, only one in four cardholders even asked in the first place.

Long payoff: Big debts will require a bit more work. One clean solution, especially if you have multiple cards in the red, is to take out a personal loan. You’ll be able to consolidate your debt into one monthly payment, and you may be able to get an interest rate lower than what you’re currently paying on your credit cards (although personal loan interest rates can exceed 20 percent, depending on things like your credit history). Personal loans have become more popular, so shop around for rates before you commit.

Any of Wirecutter Money’s recommended balance transfer cards will give you a long period of zero percent A.P.R., during which time you can retire your debt interest-free — but in many cases, you’ll be charged a percentage of what you transfer as a one-time fee.

With that time comes freedom that may get you into trouble, though. A personal loan is repaid in fixed monthly payments over a set number of months, while a balance transfer leaves the business of repayment entirely up to you. Go the balance transfer route only if you’ve got the gumption to pay off your debt before interest kicks in.

Auditing your credit cards and consolidating your debt aren’t exactly “fun.” But that’s the price of going out over your skis. Use the time between now and next year’s holiday season to get ready.

You can look for a bank or credit union that offers a Christmas club account, something we’re particularly fond of, or you can get really creative: In 2018, NBC told the story of one woman who saved $40,000 over 13 years by stockpiling every $5 bill she received, while Wirecutter has previously reported on how starting a saving circle with a group of friends can be an easy way to accumulate cash.

Article source: https://www.nytimes.com/2020/01/06/smarter-living/wirecutter/what-to-do-if-you-overspent-during-the-holidays.html?emc=rss&partner=rss

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