Stephanie AuWerter, deputy editor of SmartMoney.com, offers some helpful advice for getting back into the black.
First, asses the damage. Over the holiday season a whopping $63.6 BILLION was slapped on plastic. If you're one of the 50% of Americans who carry a balance, you will very likely be still paying for that TMX Elmo next Christmas, long after the little guy has been banished to the bottom of the toy chest. Now is the time for a game plan. Face facts, add up all those bills, review your interest rates and know how big the mountain is before you start to climb it.
Secondly, call up your lenders. It's so easy and it really does work. If you have been a good customer and you're paying more than 15 percent interest on your credit cards, call up your lender and ask that your interest rate be reduced. More than 50 percent of the time, it works. If you don't get the response you want, consider a zero percent balance transfer to a card with a better rate. Fact is, if you've been a good customer and you carry a balance, there's a lot of companies that want your business.
Also, it might be a good idea to hide your cards. If smoke is coming off your credit cards from all the use they saw in December, it's time to cool them off. Remove them from your wallet - put them in a desk drawer somewhere -- and use a debit card instead. You also want to find a way to squeeze more money out of your budget to apply to that debt. Cancel those unwatched cable channels, reduce your cell phone minutes if you don't use them, sell your unwanted Christmas gifts on ebay or cut your own hair. Send that extra money to your credit card company.
To help you pay your bills on time, pay them online. You simply can't be late on these bills. For starters, you'll get socked with a 30 or 40 dollar fee. But next, you'll probably see your interest rate shoot up astronomically. They could go as high as 30 percent. And the pain doesn't stop there. If the late payment heads to your credit report all your other lenders will see that late payment and will jack up your rate on those cards too and your credit score will suffer. It can take years to bounce back. The easiest way to avoid being late is to bank online. You're much more on top of your finances, and payments can be made electronically.
And lastly, get help if you need it. If your debts are overwhelming, you can only make the minimum payment, you're hiding your debts from your spouse or other family members or if you're starting to use plastic for basic necessities, like groceries, you need help. You do need to be extremely careful when selecting a debt counselor, but a good one can be an enormous help.
Look for a non-profit with low fees and check with the Better Business Bureau for complaints.
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by Stepanie AuWerter