4 Tricks to Ditch That Holiday Debt

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Are you stashing the credit card bills under the junk mail because you’re afraid to see how much you spent over the holidays? Surveys from USA Today and Consumer Reports reveal that we were on track to charge roughly 7% more on credit cards this holiday season. That might not sound like a big increase, but when you factor in an average interest rate of around 15%, those extra splurges can add up fast. How do you ditch that debt?According to a new survey by the National Foundation for Credit Counseling, 62% of Americans say paying down debt is their focus in the new year, so you’ll have lots of company when you’re tackling those balances. We’ll assume you’ve made a resolution to stop using your credit cards and add to your existing debt until you have those holiday bills paid off. If not, that’s the place to start. But here are four more strategies for reducing your debt load.

(MORE: 12 Things You Should Stop Buying Now)

1. Start with the highest APR: If you have balances on multiple cards, pay the minimum on all of them and funnel any extra money to the account with the highest interest rate. Natalie Lohrenz, director of counseling at the Consumer Credit Counseling Service of Orange County, recommends using what she terms the “power pay plan” to get out of debt. “When you pay off one credit card, immediately roll that payment into your next-highest interest debt to accelerate the retirement of that debt,” she suggests.

2. Be your own stimulus: You have at least a two-month reduction in payroll taxes to work with. You used to pay 6.2%, and for now it’s 4.2%. Get out the calculator and figure out what that adds up to per paycheck. It might not look like much, but if Congress extends the tax holiday again, it’ll add up to about $920 for the average family over the course of the year. Put that money toward your debt. If lawmakers can’t come to an agreement to extend the cut later this year, at least you’ll have gotten used to making do with that much less in your budget.

(MORE: 6 Percent of Us Are Still Paying Off Last Year’s Holiday Bills)

3. Cash in those rewards: For consumers with cashback credit cards, the silver lining to a holiday spending binge is that you probably go into January with a big cache of reward dollars. Convert them into a statement credit right away so at least you’re not paying interest on that portion of the debt. If you have a travel card that rewards you with points or miles, you also have this option, but check the redemption rate for a statement credit — it might be lower than if you’d used the rewards for a travel purchase.

4. Turn crummy gifts into cash: Of course you’re grateful to Aunt Ethel for those slipper socks — but she doesn’t have to know why you’re grateful. The blog MoneyTalksNews lists ways to “recycle” tacky gifts for financial gain. Your best bet is to return it to the store for cash. Do this now before the return period expires (many retailers give you until mid-January), and bring a gift receipt if you have one. Without it, you may have to settle for store credit. If you’re issued a gift card with a credit on it and you’re never going to buy anything from that store again, sites like CardHub.com have gift card marketplaces where you can sell unwanted gift cards. The blog also suggests selling the unwanted gift, donating or regifting it. All are viable options, but if you’re in a credit card crunch, the return route is the best way to get cash quickly.

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