Looking for ways to deal with holiday spending? Focusing on paying off those bills is a good idea for getting the new year off to a good start. These tips will help put you on the right start to easing your holiday debt-load. The key is to create an itemized budget of what you might spend on family, friends, co-workers, service personnel, and decorating and party items. After reviewing your anticipated budget, set to paper, an actual budget of how much cash or credit is available. Realistically balance your budget and keep to it. Don't permit impulse buying to spoil your holiday plans.
Take Control of Your Finances
Assess your outstanding debts and establish a system for paying them off. There are several inexpensive money-management software programs that can help you track your finances and assist in creating a plan to reduce your credit card balances and other debts.
If you are a homeowner, consider a home equity loan to pay off those high-interest bills. Home equity loans typically offer interest rates that are significantly lower than credit cards and are an excellent way to consolidate credit card debt. The interest paid on home equity loans is often tax-deductible. Be careful about adding debt to your home, which would be collateral against a default if payments aren't made. Consider the benefits and risks between the savings available when reducing high interest loans and credit cards and the risk of a collateral-backed loan and default resulting in foreclosure.
Tame Those Credit Card Balances
Pay more than the minimum due. Avoid the temptation of making minimum payments on your credit cards. Making minimum payments can be very costly, especially in the long run. Making minimum payments of $60 on a $3,000 credit card balance would take eight years to pay off and add up to $2,780 in interest! Paying even a little more each month will reduce the amount of time needed to pay off the balance and reduce your interest costs.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act) places many restrictions on credit card issuers and relieves consumer borrowers of some excessive fees calculated against accounts. Credit card advertisements and solicitations must be in plain language with disclosures which are clear and conspicuous. This Act amends the Fair Credit Reporting Act by requiring credit card issuers, when encouraging consumers to obtain a copy of their credit report, that consumers be informed that credit reports may be procured for free each year from the three credit reporting bureaus through www.annualcreditreport.com.
One of the most substantial reforms requires card companies to include the follwoing statement on an account holder's statement: "Minimum Payment Warning: Making only the minimum payment will increase the amount of interest you pay and the time it takes to repay your balance."
Further, the law requires a clear explanation and example of what paying the minimum versus paying a slightly higher amount which will result in a shorter term, and a reduced overall amount including less interest paid over the term.
Negotiate the best deals with credit card companies. Many credit card companies are willing to give cardholders options regarding interest rates, fees, and other expenses. If your card's annual percentage rate is over 15%, you should definitely consider applying for a lower rate credit card or asking your current company to lower your interest rate. Reducing your interest rate or transferring your credit card balances to a lower rate card could easily save you hundreds of dollars in a relatively short time period.
Keep Up With ‘Interest Free’ Purchases
Holiday shopping is filled with ‘No Interest, No Payment’ deals for 6, 12 or 24 months. However, if you do not pay off the full price of the purchase within that time period, you will be charged interest on the entire purchase amount dating back to the purchase date, even if you have paid off most of the balance. Often, the interest rate charged by the store is 20 percent or more - higher than most bank credit cards. Read the fine print of your agreement and make sure you fulfill the purchase terms to get the savings you bargained for.
The Pennsylvania Office of Attorney General’s Bureau of Consumer Protection at can be reached at -800-441-2555 or on our website www.attorneygeneral.gov
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