Holidays
Be ready when big holiday bills roll in.
Some recommendations
For those who overspent during the holidays, the experts have a number of recommendations to get you through.
First, sit down and figure out exactly how much you owe. Review all charge cards to come up with your total debt.
Track your other expenses. Some debt counselors suggest carrying a notebook to write down every single expense for a month, including that cup of coffee or pack of gum.
Create a budget. Balance your income with your monthly expenses, and what's left can be used to pay credit card debt.
Pay more than the minimum balance on cards if possible. Doubling the minimum, usually 2 percent of the outstanding balance, will go a long way toward whittling down the debt.
Ask your credit card company to lower your interest rate. If a creditor thinks you may transfer the balance to another card, it may agree to shave the interest rate.
Consider those balance transfer offers from other companies. They aren't for everyone, and there's often a fee. Be careful that the interest rate after the introductory period isn't higher than what you're paying now.
And as hard as it my be, simply stop using credit cards. Leave them at home when you go shopping. Don't tear them all up -- consumers need at least one credit card these days to make plane and hotel reservations or car rentals.
"Put them in a safe deposit box across town so it's a hassle to go get them," Dvorkin said. "Give them to a parent or friend to hold on to. I've heard of people freezing their cards in blocks of ice so they have to thaw them out to get them."
Another alternative is paying off credit card debt through home equity loans or mortgage refinancings.
Debt counselors say that can work, though some are wary of using equity that a homeowner has built up for years to eliminate unsecured debt. That equity can be better used in later years for retirement or an emergency safety net, such as for a job loss or major illness.
There are some debt counseling agencies that will help consumers set up budgets and debt payment plans. Many are nonprofit and free to consumers.
They can negotiate with credit card companies for better payment terms, reducing or even eliminating the interest rates.
"When somebody is making the minimum payment, about 75 percent goes toward interest and 25 percent toward principal," Dvorkin said. "We try to flip that so 75 percent goes to principal and only 25 percent to pay interest."
Watch out for any counseling service that promises to simply get rid of all your debts. Not even Santa Claus can make that happen.
