How to pull yourself out of holiday debt

Dec 28, 2006

NEW YORK (MarketWatch) -- Now that the holidays are over many Americans are beginning the climb out of staggering holiday debt that often looms long and large after the season is gone.

Former New Jersey state consumer affairs director and Credit.com founder Adam Levin says that the most important step in digging yourself out of debt is to create a plan.

"Look at the different interest rates on your credit cards," he advises. "Pay off the ones that have higher rates first." If you can transfer a balance to a card with a lower rate, go for it. However, when you transfer certain balances, keep in mind that the existing balance on the card will likely stay at a higher rate.

Do not under any circumstances, warns Levin, take a cash advance from a credit card to pay off debt on another. Cash advance rates are very high and cards also typically charge fees for the advance.

If you received a Christmas bonus, dedicate that to paying down the holiday debt. Whatever bills you ran up during the holiday season, pay them off on time. It's best to make more than the minimum payment, but if you can't at least pay the minimum. A late payment can trigger a universal default which causes rates on other cards to rise. But remember: "Minimum payments will keep you in debt forever."

You can also negotiate with your creditors for lower interest rates. But if you do get a better rate, Levin says you have to follow through. "You can't make a deal with someone and then have late payments."

If you find yourself in serious debt trouble, take advantage of confidential debt consultation. There are a number of debt consultation and negotiation companies that will help you negotiate down your debt. Read more on consumer debt at http://www.ftc.gov/bcp/conline/edcams/credit/coninfo_debt.htm. See the site.

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