Help for the New Year’s Credit Card Hangover

If you tightened your belt and cut down on your spending last year, it seemed to make sense to cut loose in December and buy holiday gifts, decorations, and other goodies with your credit card. Now, you have a post-spending hangover. Wincing won’t make it go away, though, and come the first week of February you’re bound for more pain when you receive your credit card statement. You may have to apply some new discipline this year if you want the ache to go away.

Take heed; it’s not a catastrophe. But here are things you should consider:

• Paying more than the minimum balance on your credit cards. Consumer Credit Counseling Services reports that paying a $60 minimum payment on a credit card balance of $3,000 will end up costing you $2,780 in interest before you can retire it all. But if you pay $110 per month, you can eliminate the debt five years sooner and save yourself $1,800 in interest.
• Finding a low-rate credit card and transferring your debt. You’ll need good credit to do this and, with new credit card laws in place this year, you may find higher transfer fees than in 2009. Depending on your debt, however, a transfer may still save you thousands of dollars in interest charges.
• Negotiating with your credit card company. There’s no reason to be rude when you call, but hold your ground. If they learn that your next step is to apply for another company’s card at a lower rate, they may try to keep you by reducing your interest rates or fees.
• Signing up for a nonprofit debt management program. Consumer credit counseling companies can negotiate with credit card companies on your behalf to reduce interest on your debt. Typically, you’ll need a hefty outstanding balance to attain services, but it may stave off a potentially disastrous bankruptcy. Please be careful when selecting a debt management service.

While you’re at it, create a high interest savings account and put away money for next December’s shopping so you can avoid this pain next year.