Paying down your holiday debt in the new year

This was originally published on Monday,January 06, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I spent a little too much last year during the holidays and created a good amount of debt on my credit cards. Do you have any advice on how to get out of my holiday debt situation?

Answer: Many of us, even after making a budget, get caught up in the spirit of giving and go overboard. It is good that you realized that you have overspent and want to get free of your holiday debt. The interest and fees add up and increase your total amount of debt.

Here are a few tips that can help:

• If you used multiple credit cards to purchase holiday gifts, pay the card with the highest annual percentage rate (APR). That does not mean missing payments on the other cards. Pay at least the minimum amount on those cards and put more into the account with highest APR. Once you finish paying off the debt with the highest interest, roll that payment into the next highest-interest-rate card.

• Get a consolidation loan to pay off the holiday debt, but don’t exceed a 12-month payment term. That way you know you’ve paid off last year’s debt before the next holiday season.

• During the holidays, many stores offer interest-free or no money down, in-store credit card deals. Know what your terms are and when your payment date starts. Interest on these cards can be just as high as traditional cards, if not higher.

• Turn unwanted gifts into cash. I know this may sound a bit tacky, but it is better than having an unwanted gift sitting around collecting dust. Typically, kids get a bunch of gifts and forget about or outgrow past gifts. If that is the case, have a yard sell and the money collected should go straight to paying off your holiday debts. You also can use auction sites to help sell your items.

• If you received a holiday bonus or end-of-the-year pay increase, use that money to help pay off your debt. If you file for your taxes early and receive a refund, you also can use that money to help pay your holiday debt.

• Find ways to help bring in extra income. Turn a hobby into a side business or get a part-time or weekend job. The extra income will help reduce your debt very quickly.

• Call your bank and see if they are willing to negotiate a lower interest rate.

• Look into transferring your debt to a new credit card that has a lower rate. These cards a called balance transfer cards. These cards have a 0- to 5-percent interest rate for a short period of time.

While you are paying off your holiday debt, it is important not to use your credit cards. Paying off your debt will relieve some of the financial stress and anxiety and free up your money for other investments.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


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