Recovering from a holiday spending hangover - Newschannel 6 Now | Wichita Falls, TX

Recovering from a holiday spending hangover

© / Brad Killer © / Brad Killer

By Andrew Housser

The new year has begun, with its promise of a fresh start, fresh resolutions and – for all too many people – a fresh pile of credit card bills filled with financial worry left over from the holidays. On average, people were expected to spend more than $800 each on holiday gifts this year, according to the National Retail Federation. Many people will take several months to pay off purchases they charged to credit cards.

Here are six steps to get a handle on holiday debt, and start to knock out other debt you may have at the same time.

1. Know the consequences of holiday debt.
Holiday debt combined with other debt can create enough debt to impact your credit score. Up to 30 percent of your FICO credit score is based on how much debt you have. People with lower credit scores may pay more for everything from mortgages to car insurance. That means your holiday bills might be even costlier than you realize.

2. Do more than the minimum.
Pay more than the minimum payment whenever you can. If you owe $1,000 from the holidays at a 15 percent annual interest rate, it will take 106 months – almost nine years – to pay it off with only minimum payments. During that time, you would pay $729 in interest, almost doubling the cost of the original purchase. Even adding $10 to the starting minimum payment would repay the debt more than 5 years sooner and save almost $500 in interest.

3. Find extra money where you can and use it to pay off debt.
Take on extra work, sell possessions you do not need, and apply unexpected money like a raise, bonus or gift to paying off credit-card bills. Consider seeking out a part-time job such as petsitting, babysitting, snow shoveling, a paper route, retail work, making deliveries or driving for consumer-to-consumer companies such as Uber.

4. File taxes early and apply your refund to your credit card bills.
If you anticipate an income tax refund, you can file as soon as you receive forms such as W-2s from employers. Have your refund direct-deposited, and you could be paying off credit card bills as early as February.

5. Get rid of debt with an avalanche or snowball.
Two methods can work to eliminate credit card debt. Both require you to pay a non-declining monthly amount toward your debt until all debts have been paid off.

Avalanche: The avalanche method involves paying off credit cards in the order of highest interest rate. From the total you can pay toward debt each month, first make minimum payments on every credit card. Then send any additional available to the card with the highest interest rate. Repeat this process every month until that credit card has been paid off. Then add every dollar you were using to pay off the highest-interest card to what you were already sending to the second-highest-interest credit card. Keep following this strategy – paying the same amount each month toward your debt – until you clear every debt.

Snowball: The snowball method involves paying off the lowest debt amount first. First, just as you would with the avalanche method, budget enough to pay the minimum on all cards. Then apply remaining funds toward paying off the credit card with the lowest balance. Once you pay off the first credit card, continue paying the same monthly amount you started with. Follow the same strategy as the first credit card: Pay only the minimum payments on all other cards while using all the remaining funds to pay off your second-lowest debt.

6. Be honest about your debt situation.
If you evaluate your situation and feel that your chances of getting out of debt on your own are poor, take action to get help. Many options exist, including asking lenders to work out a payment plan to seeking help from a reputable debt negotiation firm or credit advocate. Seek out a credible company among the accredited members of the American Fair Credit Council.

It can be frustrating to face a mountain of holiday debt in January, but it is not too late to take action to get out of debt quickly. Doing so can be a wonderful belated holiday gift to yourself.

Andrew Housser is a co-founder and CEO of, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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