Best Strategies For Paying Off Holiday Credit Card Debt

Best Strategies For Paying Off Holiday Credit Card Debt

January 28, 2016         Written By Jason Steele

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According to the most recent Gallup poll, about half of all American credit card users will carry a balance on at least one of their credit cards at some point in the year. For many people, the holiday season is synonymous with both overspending and credit card debt. Paying off your holiday debt as soon as possible will save you money on interest charges while sparing you the stress and emotional toll of carrying around debt each month.

Creating a strategy for paying off holiday debt

The most important strategy to pay off holiday debt is to have a plan. Too many Americans in debt make the mistake of avoiding confronting their unpaid balances and changing their personal finance behavior to pay it off.

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The first step towards creating a strategy is to take an inventory. Start by adding up all of the accounts where you owe money, taking note of the interest rate for each account.  It’s also a good idea to check your credit score to see where it stands in light of any newly acquired debt. Fortunately, many credit card issuers now offer customers a free monthly credit score.

Obtaining an interest-free balance transfer offer

If your credit score is considered to be “good” (700-749), or “excellent” (749-850), then you should consider applying for a credit card with an interest-free promotional financing offer for balance transfers. These offers allow you to take a break from paying interest charges for a limited time. By law, these offers must last at least six months, but the most competitive offers can last as long as 21 months. Once the 0% APR promotional financing rate expires, only then will the standard interest rate apply to any unpaid balance. There is no annual fee for most cards with these offers.

In most cases, these offers will require the payment of a 3% balance transfer fee, but there are some exceptions. For example, the Chase Slate card offers 15 months of interest-free financing on both new purchases and balance transfers, with no fee for transfers completed within 60 days of account opening. Another example is the Capital One QuicksilverOne card, which offers 0% APR on new purchases and balance transfers for nine months. There is no balance transfer fee for this offer, but there is a $39 annual fee.

If you are looking for the longest duration in a promotional financing offer for balance transfers, then you should consider the Citi Simplicity card. It offers 12 months of interest free financing on new purchases and 21 months on balance transfers, as long as the transfer is made within the first four months of being a cardholder. There is a 5% balance transfer fee. The Simplicity card features no late fees or penalty interest rate. There is no annual fee for this card.

Utilizing an interest-free balance transfer offer

Obtaining an interest-free balance transfer offer is only the first step, and it’s important to utilize this offer in the most efficient way possible. While cardholders are only required to pay the minimum balance each month, it is a good idea to pay much more, even with an interest-free offer. In fact, the best advice is to pay off enough each month to ensure that the entire amount is paid off before the promotional financing period ends.

When these offers are used to pay off debt as quickly as possible, they can be quite effective. By allowing 100% of the payment to go towards the repayment of principal, cardholders can retire their debt much sooner than they could have otherwise. But when cardholders use these interest-free financing offers to postpone repayment rather than to encourage it, they are setting back their efforts to pay off their debts. Unfortunately, some even use these offers to procrastinate under the assumption that they will qualify for another promotional financing offer in the future.

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Other strategies for paying off holiday debt

Beyond interest free promotional financing offers, there are ways to pay down debt more quickly while minimizing the interest that you pay. First, it’s important to always make payments towards the balance with the highest interest rates first. In addition, it’s important to realize that credit card interest is incurred based on the cardholder’s average daily balance, so each day that you wait to make a payment is a missed opportunity to reduce your interest costs.

For example, there is no reason why you can’t make multiple payments each month as the money becomes available to you. This is called making micropayments. In fact, there is no limit to the number of payments that can be submitted each month, and each one will contribute to paying off your debt while reducing interest costs.

Finally, it’s always worth contacting your card issuer and asking for a lower interest rate. When you have a strong record of on-time payments, card issuers are sometimes willing to lower your standard interest rate.

By taking every possible opportunity to pay down your holiday balances, you can pay off your debt sooner than you might have thought.

Note: The information for the Chase Slate has been collected independently by The product details on this page have not been reviewed or provided by the bank advertiser.

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The information contained within this article was accurate as of January 28, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Jason Steele

Jason Steele is a journalist that covers credit cards, travel and consumer credit. As one of the nation's leading experts in credit cards, Jason has contributed to dozens of travel and personal finance outlets including NerdWallet, Credit Karma and the Points Guy, where he serves as the Senior Points and Miles Contributor. Jason has also been widely quoted in mainstream media in outlets such as the Washington Post, the USA Today and Bloomberg Business Week. Jason is also the founder and producer of CardCon, which is the annual Conference for Credit and Credit Card Media.
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