The Real Cost of Holiday Shopping

Credit Card Balance Transfer

This solution works best when you have a limited amount of debt ($2,000-$3,000) and a good-excellent credit score (700+ is ideal). You get a new credit card that offers low APR balances that you transfer from existing accounts.

With a high credit score, you can qualify for cards that offer a 0% APR introductory period for 6-18 months. This gives you time to pay off your holiday shopping debt interest-free.

How to use this debt hangover cure:

1. Shop online for a balance transfer credit card that offers a long 0% APR period and low transfer fees.
2. Once you get approved for a card, call customer service or go online to transfer your balances.
3. Each transfer will come with a fee that usually averages 3-5% of the balance transferred.
4. Once you have everything moved over, divide the total balance by the number of months you have 0% APR.
5. Make that payment to pay off the balance in full before the 0% APR period ends.

Debt consolidation loans

This solution works best if you have a larger volume of debt. If you were already carrying balances before the holidays, then holiday shopping may have sent you over a cliff. In this case, you take out a personal loan to pay off your credit card balances. This leaves only the low-interest rate loan to pay off.

This solution works best when you have less than $25,000-$30,000 in credit card debt and a good-excellent credit score. You may be able to afford the payments if you owe more and have ample cash flow in your budget. You can use a loan calculator to make sure you can afford the payments before you apply.

How to use this solution to cure a holiday shopping hangover:

1. Shop online to find the right loan to fit your needs:
   1. Check the term of the loan (most range from 12-48 months, although some go out to 60)
   2. Look for low or no loan origination fees
   3. Check the APR range that the lenders offer
   4. No early repayment or prepayment penalties
2. Once you find the loan you want, apply for it. When you get approved, the loan underwriter will ask you to choose a term.
   1. A short term means higher payments but lower total interest charges
   2. A long term means lower payments, but higher total interest charges
3. The funds will then get distributed to pay off your credit cards and other existing unsecured debts.
4. This leaves only the loan to repay. You’ll enjoy fixed monthly installment payments.
5. When possible, try to make extra payments to pay off the balance faster. For example, use your tax refund in spring to make an extra loan payment.

Make sure not to make new charges on your credit cards until you have the debt paid off. Otherwise, you can end up with more debt instead of less!

Debt management program

If you have more than $30,000 in credit card debt OR you have a bad credit score, you may not qualify for the do-it-yourself cures. In this case, you might need help to pay off your balances in full. In this case, a debt management program is usually your best option.

This solution works even if you have bad credit or owe more than $100,000. Instead of taking out new financing to pay off your existing debts, you set up a repayment plan through a credit counseling agency. The work with your creditors to reduce or eliminate the APR applied to your balances, which makes it easier to get out of debt faster.

Using this solution to cure your holiday shopping hangover:

1. Contact a nonprofit credit counseling agency to get a free debt and budget evaluation.
2. A certified credit counselor will review your debts, credit, and budget to make sure a debt management program is your best option.
3. If it is, you’ll find a monthly payment you can afford on your budget.
4. Then the counseling team will work with your creditors to minimize APR and stop future penalties.
5. Once all your creditors agree, you make one monthly payment to the agency and they distribute the payment to your creditors on your behalf.

Each payment you make helps you build a positive payment history on your credit report. As a result, successfully completing the program can help you improve your credit score.

The catch is that any cards you include the program will be closed when you enroll. You won’t be able to apply for new cards while you’re enrolled either. However, this can be a good option to help you break any credit card dependence you may have developed that led to all this debt.