If you and your credit cards went a little overboard in the spirit of holiday giving, now is the time to buckle down and pay off those debts before the interest has you feeling like the Grinch.
Stop Using Credit Cards
"If you want to get out of debt, the first thing you have to do is stop using credit," said Michael Rupured, an Extension Service financial management specialist with the University of Georgia College of Family and Consumer Sciences.
"If you must," he said, "keep one card for travel and emergencies. But leave the card at home in a safe place until you need it."
Cut up all your other credit cards, he said. And close out the accounts.
Make a List and Check Your Rates
Next, make a list of all your debts, excluding your mortgage. For each debt, write down how much you owe, the Annual Percentage Rate (APR) and the minimum payment. Using this list, determine the total you owe, how much you pay in interest each month and how much goes for debt payments.
"If you're behind or have a hard time making minimum payments, you may need help," Rupured said. "Nonprofit credit counseling agencies can help you develop a debt repayment plan that fits your budget." Check under "credit counselors" in the yellow pages of your phone book.
If you can afford minimum payments, you can get out of debt without professional help.
Pay More to One Debt First
"Make the minimum payment on all but one of your debts," Rupured said. "Then put any extra dollars you can come up with toward that one debt you excluded. Focus on the debt with the highest APR to save the most on interest."
Continue applying the same amount to debt payments every month until all the debts are paid.
"As you pay one credit card or other debt off, add that amount to your payment for another creditor," he said. "If you have seven debts with a combined monthly minimum payment of $725, continue to pay $725 until you have repaid all seven debts."
Rupured says increasing your monthly debt payment by $25 can knock several months off your debt repayment time.
Use Extra Money Wisely
"Put tax refunds, bonuses, gifts or prizes toward your debts to pay them off even faster," he said. "With fewer bills to pay, you'll have more money, write fewer checks and even save on postage!"
For more help, ask your county Extension office about information on the PowerPay Credit Payment Worksheet. Once you complete the PowerPay information form, you'll get several printouts showing a repayment schedule, how long it will take to pay off your debts and how much you will pay in interest.
(Sharon Omahen is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.)