CHICAGO, IL -- (Marketwire) -- 12/13/12 -- As part of BMO Harris Bank's ongoing commitment to financial education and Making Money Make Sense, BMO Harris is providing weekly financial tips. This week's tip provides steps to tackle holiday credit card debt.
If you've already paid for holiday gifts, decorations and entertainment using a credit card, don't despair -- there are steps you can take to quickly pay down debt and regain confidence in your finances.
Debt can be incurred from sources other than holiday expenses, including mortgage, auto, student and personal loans. But BMO Harris recommends tackling your credit card debt first -- it's likely your debt with the highest interest rates and is more likely to negatively affect your credit score.
Take the following steps to kick your debt to the curb:
Stop creating more debt. If you're like many people, you probably use your credit cards to make everyday purchases. But to start reducing debt, you need to put your credit cards away, especially after the holidays. Even small purchases add up and if you don't pay off your balance in full every month, you could end up paying thousands of dollars extra for these necessities. Instead, wouldn't it be nice to save more of your money for vacations, a new car or a rainy day fund? Instead of using credit, try paying for everything with cash or a debit card.
Talk to a financial professional. Facing debt can be an emotional task, but getting unbiased advice can help. A BMO Harris banker can help you review your situation and create a priority payoff plan based on which debt has the highest interest rate. As your debt begins to shrink, consider using the cash you've freed up to open a savings account so you can break the cycle of using your credit card to fund your holiday expenses.
Pay more than the minimum payment. It may not seem like much, however paying just $25 more toward your debt each month can make a huge difference in the amount of interest you'll pay over time. By increasing your monthly payments by just a small amount, you'll pay down your debt faster and significantly reduce the amount you'll pay in interest. You'll also free up your available credit, which can improve your credit score. By boosting your credit score, you'll become eligible for better interest rates on loans, helping you save even more in the long run.
Consolidate your debt. The interest rate for most credit cards hovers between 15 and 18 percent. Now compare that with the 4 percent interest rate many home equity lines of credit offer. Consolidating your credit card debt into a home equity line of credit could save you up to 14 percent in interest, plus you'll have the added convenience of making only one monthly payment, instead of paying several bills each month.
With careful planning, you can take control of your debt and save yourself thousands of dollars in the New Year.
Put yourself in a comfortable place and get started with these Helpful Steps.
The Learning Center at Helpful Steps is a financial education initiative brought to you by BMO Harris Bank, WGN, CLTV, WGN AM 1070, Chicago Tribune, RedEye and Hoy.
About BMO Harris Bank
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through over 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. BMO Harris BankSM is a trade name used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.
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