Get rid of extra holiday debt by getting rid of your current credit card. (But do not cancel your old card. Canceling a credit card could negatively impact your credit score.) Look at a zero percent interest rate card. Nathan Grant, a credit card analyst at Credit Insider, said it can really reduce the amount of interest you will pay.
“By transferring a balance to a credit card that has a zero percent annual percentage rate (APR), you’re able to just really focus on just that remaining balance,” he said. “And usually the cards give you anywhere from a year to up to two years with zero interest.”
“It sounds great and it is to avoid interest,” he said. “But a lot of times they’ll hit you up front with either a three to five percent fee for transferring the balance.”
There is another cost as well if you do not pay off your balance by the deadline. It is called “deferred interest” and it is not cheap.
“If you have any money left at the end of the promotional period that was from that initial purchase made or purchases made in that first billing cycle, then you’re going to be charged the interest of the entire amount at the end of that promotional period,” said Grant.
Zero percent interest rate cards can also be tough to get unless you have good credit, so see what your current card offers first.
“Sometimes tapping into your existing relationship is one of the best things you can do,” Rossman said. “Many credit card companies have their own kind of hybrid credit card/personal loan installment programs. They go by names like American Express Pay It Plan It, Citi Flex Pay, and My Chase Plan. Basically, these are for existing cardholders and you can designate specific purchases, usually $100 or more and pay them off in installments so there’s predictability.”
The interest rate on those purchases can also be reduced.
“So instead of your normal 15 or 20 percent, maybe you’ll be charged six or 10 percent or something like that. It’s not zero, but it can definitely save you,” said Rossman.
Also, consider nonprofit credit counseling if you have several thousand dollars worth of debt.
“They help you consolidate payments,” Rossman said. “They lower your interest rates, they negotiate with your creditors on your behalf.”
Programs like Money Management International and GreenPath are not free, but low cost. There is usually an initial set up fee and then a monthly fee. A counselor will help you set up a debt management plan to pay off your debt in two to five years.
There are also many other ways to pay down your debt.
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