Managing Debt

Help! I Just Got My Holiday Credit Card Bill

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Billing cycles, like the weeks leading up to Tax Day and a student loan grace period, come to an end, and then it’s time to pay up.

Holiday shoppers are experiencing this depressing reality firsthand as they receive the bills tallying up December’s spending. Even the most budget-conscious consumers can go overboard when it comes to gift buying, but regardless of how prepared you are come January, the credit card bill cannot be ignored.

Do I Have To Pay?

When your account statement arrives, it can be tempting to let it fall to the bottom of the mail stack or hit “delete” in your email, but avoiding an unsavory credit card bill is the worst thing you can do. First, it may take you a few days to come up with a plan for adjusting your budgets in order to pay the bill. Second, you may forget about it, putting yourself at risk for missing the payment and incurring late fees and a penalty APR.

Payment history is also the most important factor in determining your credit scores, so missing the due date can cost you when it comes to applying for other forms of credit. Those with high credit scores tend to get the most favorable interest rates and are more attractive to lenders than those with low credit scores. You can see how your past bill-paying practices and other financial behaviors have affected your credit scores by checking your free Credit Report Card.

A missed bill payment could explain a low credit score or poor grade in the payment history section of the report card, so if you want to avoid a negative hit like that, pay as much as you can afford by the time your bill comes due.

When the Bill Is Bigger Than You Expected

Perhaps you gift-wrapped a chunk of your spending, but maybe you treated yourself to a few gifts, too. In that case, a jaw-dropping credit card balance may be reversible, to a certain extent. If you bought anything unnecessary that still meets the retailer’s return policy, go get your money back. If that doesn’t work, your credit card may have a purchase protection policy that let’s your return the item, so check your cardholder agreement to see if your purchase qualifies. Be resourceful with what you have: Consider selling any gently-used items you don’t need in online marketplaces to shore up your bank accounts.

One of the best things you can do is sit down and look at your coming expenses. In order to pay the credit card bill, do you have anything you can cut from your budget? (Don’t have one? There’s no better time to start one than at the beginning of the year.)

Whether it’s cutting back on shopping, eating out less or remembering to use coupons, saving a little money in many places could generate a helpful cushion when your credit card payment hits your checking account.

When the Bill Is WAY More Than You Can Afford

If stopgap measures like rearranging the budget and finding some extra cash won’t cover this month’s payment, you may want to consider more strategic financial moves.

If you’re looking at paying down the balance over the course of several months, transferring it to a card with a much lower interest rate could save you a lot in the long run. Be mindful of transfer fees and the promotional terms of the new card — opening a new account in this situation is worth it only if you save money. You can also consider other consolidation tactics, like paying the balance with a low-interest personal loan.

Paying down debt, whether it’s a mountain or a speed bump, needs to be approached with a plan, and that course of action should include some changes in your habits. You don’t want to continue to do the things that got you into debt in the first place, so put the credit cards away for a while, and when you decide to use them again, remember to spend only what you can afford to repay.

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Image: Monkey Business

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