How to Deal with Holiday Debt

Waheeda Harris

Filed under: Budgeting & Planning, Debt, Family Finances, Holidays

Gifts have been given, dinners have been hosted and the holidays are winding down. When the credit card bill arrives, what's your reaction? Hide the bill? Freak out?

HSBC says the way to deal with holiday debt is to develop a plan - and avoid sweeping holiday credit card bills under the carpet. By postponing the consequences of a holiday overspending, incurring late payment fees and the possibility of having to pay additional interest or even worse, affect your credit rating.

So before the bills start to show up in the mailbox, follow these rules:

Don't grow the debt - while it is easy to get caught up in overspending around the holidays, the New Year can provide even more temptations as retailers ramp up their January sales. Back away from these enticements as they will only increase your debt obligations. Remember, saving 60 per cent on something you don't need is not the same as "pocketing" an extra 60 per cent.

Develop a realistic debt management plan - put away credit cards and establish a realistic repayment schedule (forget about only paying the minimum) and stop adding to the debt you already have. Figure out how much you can afford to pay toward your debt each month and stick to a schedule.

Consolidate all your debt -many consumers spread their debt across a variety of credit cards and personal loans, and try to pay the minimum amount on each every month. This is the least effective way to manage debt. If debt is substantial, talk to your bank to see if you can get a consolidation loan with a low interest rate. A consolidation loan can be used to pay off all your other debts and will simplify your debt management process.

Focus on the financial long term goal not the immediate pain - a major goal for many Canadians is to become debt free – or at least free of "bad" debt (which was taken on to purchase depreciating consumer items.) It's amazing how quickly your cash flow will improve once you stop having to make those monthly payments for items you purchased months or even years ago. Stick with your plan and try to focus on your goal and keep cutting back on other discretionary purchases until you get the weight of the holiday debt off your shoulders.

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