Ghost of Christmas Past: Will Holiday Debt Come Back to Haunt Your Credit Score?

While the holiday cheer dies down, some consumers may wake up from their Christmas slumber to a large credit card bill. Although you might have been careful to not take on too much debt during the holiday season, you likely have higher credit card payments to deal with. As you pay down your holiday debt, consider these tips:

Reduce Debt with the Snowball Method
When you have more debt than you anticipated, it may seem so overwhelming you might not know where to start, which could cause bills to pile up. To avoid having too many bills that make it harder to keep track of your payments, consider paying off your smallest balances first. Known as the snowball method, consumers can reduce their debt by completely paying off one card before going after the rest, according to Today.

The effect of this snowball method on your finances is huge, as even paying off a small balance could give you confidence to move on to other larger payments.

Focus on High Interest Debt
If you were like other consumers during the holiday period, you most likely charged your purchases on several cards. However, it's probably hard to decide which card to pay off first. Like other credit obligations, it might be helpful to concentrate on paying off debt with the highest interest first.

For example, if you have a credit card balance of $2,000 with an annual percentage rate of 22.9 percent, then you could be paying more on interest payments compared to another card that had the same balance but with an APR of 18 percent. Depending on the total credit card payment for each card, factoring in the balance and interest rate, paying off the card with the highest interest rate could help you significantly reduce the amount you pay each month. 

Transfer the Balance
Another approach you can take is to transfer your balance to avoid high interest rates, according to Today. Consider the benefits of applying for another credit card to take advantage of zero percent balance transfer offers. Cards often have introductory rate periods that allow you to pay 0 percent APR each month for a certain period, such as 18 months, before rates increase. This could give you enough time to allocate what you would have paid in interest to your credit card bills instead.

When looking for a new card to transfer your balance to, look for a card that will have no transfer fees. As you transfer your balance to another card, remember you have a limited time before the interest payments start to grow. During this time you should work to actively pay off your debt before bills balloon as they did with your old cards. 

Pay More than the Minimum
Although you probably have several credit bills to pay attention to, putting down more than the minimum monthly payment will lower your debt faster. Ideally, you should try to pay off your credit card bills in full each month. However, with the extra spending that comes with the holiday season, this may be harder to do. Rather than simply paying the minimum, consider paying an extra $50 each month or more to reduce your interest payments and work toward lowering the principal, according to credit.com.

Keep Track of Payments
Although it's difficult, be sure to keep track of your credit card payments and pay each card on time every month. To help you with paying by the due date, you could set up automated bill pay to streamline the process and ensure you don't forget to send in a payment, which could set you back financially.