Thrifty Thinking: 6 Tips for Curing a Holiday Debt Hangover

Beverly Harzog, a nationally regarded credit card expert, consumer advocate, and author of the new book, "CONFESSIONS OF A CREDIT JUNKIE: Everything You Need to Know To Avoid the Mistakes I Made" (Career Press, 2013) says, "Sometimes we have good intentions, but still end up in debt after the holidays. Don’t panic if you spent too much on your credit cards.

"Stay calm and try these suggestions to help you get rid of the debt as soon as possible.

#1: Stop using all of your credit cards
This might seem obvious, but if you’re in over your head, you may be tempted to use your cards, especially if you’re now having cash flow issues. To be clear, this means you must stop using all of your credit cards, not just the ones that have balances.

This is a critical step. This is how you stop the debt from getting bigger and bigger. And this also means that you put away the cards until you’re totally out of debt.

#2: Consider a balance transfer credit card
If you still have excellent credit, you might qualify for a zero percent APR balance transfer offer. Right now, offers are ranging from six months to 18 months.

The plus side? You have a chance to pay off (or at least pay down) your debt and pay zero interest during the intro period. The down side? There’s a transaction fee, usually about 3 to 4 percent. But in many cases, the amount of interest you save will outweigh any transaction fee you have to pay.

#3: Negotiate a lower interest rate
If a balance transfer isn’t a good option for you, consider calling your issuer and asking for a lower interest rate. If you’re successful, you might save a bunch on interest expense.

This strategy will work best if you’ve been a great cardholder. For instance, if you pay your bills on time and still have a pretty good FICO score, this is worth a shot. If you aren’t successful with the first person you speak to, ask to speak with a supervisor. Be ready to explain that you want to remain a customer, but if your rate isn’t lowered, you might have to look for a credit card with a lower APR.

#4: Create a plan of action
There are a variety of methods for paying off debt. I prefer the method that saves the most money, which is the debt stacking method. You target the card with the highest interest rate first. You pay more than the minimum on that card while paying the minimums on your other cards. With this method, you save a lot on interest expense.

Some folks like to start with the smallest balance, regardless of interest rate. Once you pay off the smallest balance, you start on the  next smallest balance, working your way up to your largest balance. This is called the debt snowball method. The goal is to wipe out each credit card balance as fast as possible so you get a psychological lift. But keep in mind that with the snowball method, you pay more interest.

It’s important that consumers go with the method that they find most appealing. If they feel good about their progress, they’ll be more likely to stick with their plan until they’re debt free.

#5: Find money you didn’t know you had
Take a long hard look at your budget. Review every single line item and ask yourself how you can cut expenses. In some cases, you can cut out an expense temporarily, like entertainment, until you’re out of debt.

Some line items, though, like groceries can’t be eliminated. But you can “downsize” an expense. Cut back on the expensive grocery items you buy unless it’s a special occasion. Another option is to check out the excellent couponing websites that can help you save money on a variety of items.

With the downsizing approach, you can also choose to keep something in your budget that others might consider unnecessary. For instance, when I was in debt, I gave up my expensive health club membership and joined a local gym at a fraction of the cost. Exercising was important to me because being in debt is stressful.

And remember, unless your debt is huge, we’re talking about temporary suffering. Squeeze every dime you can out of your budget and then throw the money you save at the debt. It’s essential to get to the point where you’re paying more than the minimum monthly payment.

#6: Consider credit counseling if you feel like you’re drowning
If you were already in credit card debt before the holidays and you used your cards to pay for gifts, then you might be seriously hurting at this point. Take a look at the total amount of your debt and play with the numbers. Think about the maximum amount you can pay each month. Will it take you more than three to four years to pay it off?

If so, then you might wonder if you need a second job. Well, that’s an option for some. But if you’re already working hard to support a family, that might not be realistic. When you have kids, there are childcare issues (and costs) to consider.

The bottom line: If the debt makes you feel like you’re drowning, you might want to consider talking to a credit counselor to explore your options. Contact the National Foundation for Credit Counseling or CredAbility to speak with a reputable counselor who can help you.