How to Pay Down Holiday Debt ASAP

Pulse racing? Head pounding? Anxiety starting to surface?

No, we’re not talking about the hangover you may or may not have woken up with on New Year’s Day morning, we’re talking about what you felt when you took a look at your recent credit card statement. You know, the one with all of your holiday purchases on it.

Even despite a shorter holiday shopping season from Thanksgiving falling later on the calendar in 2019, holiday sales increased about 3.5 percent this year compared to one year ago, while ecommerce sales increased to the tune of nearly 19 percent from the previous shopping season. If you followed this trend, it likely meant spending beyond your means. But now that the realization has set in, it’s important to not let this holiday debt linger, and for a few reasons:

Your holiday debt is likely revolving debt, that is debt that consumers aren’t obligated to pay off each month. In fact, credit card companies don’t want you to pay off your balance monthly because they earn more off you in interest the longer it takes for you to pay it off.
It could be hurting your credit score: Holiday debt could impact your credit utilization ratio, or your balance versus your total credit limit. Usually, you want to keep this at or below 30 percent for the best possible credit score. For example, if you have a credit card with a $10,000 limit, you want to have a balance at or under $3,000 for a better credit score.

Like we said above, it behooves you to settle any holiday debt you’ve accrued as quickly as possible. Here’s a look at some tips on paying down your holiday debt to help you get it done:

Reel in Spending

Simply paying the minimum amount on your credit card isn’t going to pay down your holiday debt in the near-term, so we advise taking it easy in January so you can allocate more money toward your balance. Refrain from dining out, catch a movie on a streaming platform rather than go to the theater and skip the weekly after-work happy hour. Put what you save toward your debt balance.

Reduce Your 401K Contribution

If you’re contributing to a 401K each paycheck and you’re serious about paying down your debt quickly, we’d suggest temporarily decreasing your contribution and putting the excess money toward your debt. Just make sure that you’re disciplined enough to increase the contribution when you’ve paid off your holiday spending.

Combine Debts (if Applicable)

If you have debt on multiple credit cards, it may be worthwhile to look into combining your credit card debt at a lower overall interest rate so that you just have one — rather than several — monthly payments to make each month. Doing so can offer financial savings when it comes to the interest rate and make paying down your holiday debt and other payments much easier.

Reassess Monthly Spending

The new year is always a great time to reassess your monthly spending. Take stock of your expenditures and chart out what’s a necessity, what’s a luxury and what you don’t need anymore. Make sure you cut out anything that you don’t need anymore and think carefully about whether or not you need the “luxuries.” You might also shop around to see if you can save money on necessities like car insurance, homeowners insurance, cell phone plans, TV packages and more to see if there’s a better deal out there. When it comes to reducing monthly spending, it’s usually not just one thing, but several little things that can make a big difference in the end.

New Year’s Resolutions for Better Credit

 

A new year always marks a new beginning, a fresh start. And part of this fresh start is making certain resolutions or goals to follow through on. Aside from getting healthier and joining a gym, the next most popular resolution is usually something financially related. And more often than not, a good financial situation and a good credit score tend to go hand in hand. That is, you normally cannot have one without the other. That said, why not make 2020 the year you get your credit score back in shape? Here are some resolutions that you can enact for better credit in 2020 and beyond:

Assess Your Financial Health and Set a Budget

The first step to boosting your credit score is to see where you stand. Do this by first checking your credit score or pulling your credit report, and then knowing your revolving debt, or the debt that continues month after month (i.e., credit card debt). One of the keys to a better credit score is low revolving debt. In fact, for a better credit score, you’re advised to keep your debt-to-credit ratio at or under 30 percent. This means if you have a credit card with a $10,000 maximum, you’ll have a higher score if your balance is at or less than $3,000 than you would if it was more than that. Revolving debt can quickly spiral out of control if you’re not careful, costing you lots in interest. It’s why you should be setting a budget and cutting expenses to ensure you can maintain as close to a zero balance as possible.

Build an Emergency Fund

It’s estimated that about 40 percent of all Americans wouldn’t be able to pay for an unexpected $400 out-of-pocket expense. That’s a problem, especially when you consider that using a credit card or taking out a loan to finance such could negatively influence your revolving debt and increase your debt-to-credit ratio. This is more of a preventative measure, but building up an emergency fund to tackle rainy day expenses can potentially help save your credit long-term. Most experts suggest having at least three months’ worth of expenses saved in such an account.

Other Strategies

Sometimes it’s the smallest things that can make the biggest difference, like paying your bills on time — which accounts for more than one-third of your overall credit score. You might even look into combining debt so that you have one, rather than multiple, monthly payments to make. This can be an especially attractive option now with how low interest rates are. And lastly, don’t be afraid to seek help if you need it. If your credit is in poor shape, a credit counselor may be able to help you get back on the right track.

Check Your Report

Last but not least, make sure that you’re checking your credit report at least once a year. It’s estimated that up to 25 percent of all Americans have some sort of error on their credit report, and discovery of such is the key to disputing it. After all, an error on your report could be contributing to a lower overall credit score. If you do notice an error, you’ll need to dispute the item with each of the three major credit reporting bureaus. You can do this either by phone, online or via mail. Make sure you have documentation to back up your dispute.

It’s estimated that about 80 percent of all Americans give up on their New Year’s resolution by February. But if you dedicate yourself to the cause, understand how important good credit can be and realize how easy some of the repair tips are to implement, you can be on the right path to an improved credit score in no time.

Holiday Shopping Scams to Avoid This Holiday Season

You’ve likely seen stories in the news about “porch pirates,” or the thieves that go about swiping deliveries off of front porches for their own gain. And while this type of theft is always more prevalent during the holiday season, there are other and potentially more damaging crimes that you need to be on the lookout for. We’ll take a look at some of them in this post:

Popular Scams to Be on the Watch For

While porch pirates are a threat during the holiday season, they’re easy to catch if you’re among the many homes that are equipped with a video doorbell. Other scams that we’ll detail below, however, aren’t as simple to mitigate. Worse yet, they could have long-term consequences on your financial situation and credit score. Here’s a look:

  • Empty gift cards: This is a new trend, and there’s about a 20 percent chance you’ve been a victim of it already. It’s the empty gift card scam, and it involves thieves getting the account number and PIN of gift cards that sit on racks so they can swipe the funds on them as they are activated. This info is usually covered in sticky tape, which is removed and replaced by the thieves. To avoid being victimized, look closely to make sure this sticky tape hasn’t been manipulated.
  • Fake charities: If you’re a fan of “Seinfeld,” then surely you recall the episode where George gifted the office with holiday donations to the fake “Human Fund.” But Seinfeld is fictional – the fact is that charitable scams are much more prevalent this time of year when people are more apt to give. Bottom line: Make sure you do your homework on the charity that’s targeting you for money. According to an AARP survey, more than half of Americans that did research on a charity wound up not making a donation to it. You know what they say: “Knowledge is power.”
  • Delivery cyberattacks: If you get an odd email from FedEx, UPS or another delivery service, beware. There’s a good chance that it’s a hacker trying to swipe some personal information from you. If you ever receive a strange email from any delivery service about a package that’s coming your way, the best thing to do is log into the site where you purchased it to track the shipment. You don’t want to click on any links or provide any personal information that could come back to haunt you.
  • SMiShing: There are cyberattacks, and then there are text messaging scams. SMiShing falls among the latter. The most common type of SMiShing attack is receiving a text stating that your debit card has been locked for suspicious activity, with an ask for you to supply the PIN to unlock the card. Don’t fall for this trick, which tries to scare you into fast action. Instead, contact your financial institution to report it.
  • Phony credit card offers: Zero APR! Amazing rewards! A terrific sign-up bonus! No annual fee! If a credit card offer you receive in the mail appears too good to be true, that’s because it probably is. Credit card scammers will pull out all the stops this time of year in an effort to get you to apply for them. But what they’re really looking for is your social security number that you have to provide when applying for any type of line of credit. Once they get that, then they can steal your identity. Be careful about falling for any of these too good to be true offers this holiday season.