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Still paying off holiday debt? How to make a plan

By Christine DiGangi/Credit.com

Outstanding credit card debt increased by $29.2 billion from November to December 2014, reflecting the typical spending frenzy that comes during the holiday season (for comparison, it jumped only $8.2 billion from October to November, according to Federal Reserve data). Of course, a surge in credit card debt is something that can last long after the holidays end, and if you're still paying down those high balances, you're not alone.

Say you spent an extra $1,000 in December on your credit card with a 13 percent APR (that's about average). Even if you threw $300 a month at that bill since you got it, you would be close to paying it off by now, but not quite there yet, and your balance will have grown by $24 by the time you pay it off. If you're chipping away at the debt slowly -- say, $100 a month -- you'll just finish paying for last year's gifts by the time the 2015 holiday season arrives. It's remarkable how long it can take to pay off a seemingly small amount of money.

When you're working on getting out of debt, you need to commit to a realistic repayment plan. That makes the rest of the sometimes-difficult process much easier.

Explore your options

Start by figuring out exactly how much debt you have and what the interest rate is. You can plug those figures into this credit card payoff calculator and see how quickly you'll get out of debt by continuing to make the monthly payments as you are now. If the debt-free date it calculates isn't where you'd like it to be, it's easy to see how changing your monthly payment amount can get you out of debt faster.

Changing figures in a calculator is the simple part -- allocating extra money for credit card payoff will get you out of debt faster, but it's crucial you determine an affordable amount. Unrealistic goals will only frustrate you and set you up for failure.

Figure out how much you can afford to pay each month, commit to paying it, and as long as you don't continue increasing your credit card balance, you can confidently look forward to reaching your debt-free date. Paying off that debt will also have a positive impact on your credit scores as you lower your credit utilization rate -- a nifty number that compares your credit card balances to your limits. (You can see how your credit utilization is impacting your credit scores for free on Credit.com.)

Choose your approach

If you have more than one credit card with a balance, you may not be sure what's the best way to tackle the debt. There are many strategies with different advantages and drawbacks, so you need to decide what approach is most likely to help you succeed.

Some people like to start by paying off their smallest balance card first. The sooner you experience success, the more motivated you will be to pay off the next debt. That's the idea, anyway. It's called the snowball method: Start small and build momentum for eventually getting rid of all the debt.

If you're trying to get rid of your debt as quickly as possible, there's the avalanche method: Start by attacking the balance with the highest interest rate, because the balances on your lower-interest cards won't grow as quickly. Go big from the beginning so you can move out of living in debt as soon as possible.

The most important thing about making a debt-payoff plan is your ability to complete it. It's can be a huge challenge to stick to your goals, so make it easier on yourself by being honest about what you can afford and what motivates you.

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