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Easy methods to Recuperate from Trip Credit score Card Debt

After the fun of opening gifts in December, some of us are left with a far more unwelcome gift to open: your credit card statements coming in the new year.

When you're faced with a mountain of bills and a pile of regrets, you're not alone. But it's time to make changes – and now is the time to start on the right foot.

It's wise to avoid credit card debt as it will cost you a lot more than just the interest charges you're piling up. It can ding your credit score and make it that much harder to qualify for a future mortgage at the price you want when it comes time to buy a home.

So, here's what you need to know to get out of vacation credit card debt and stay there.

How can we avoid overspending during the holidays?

You might have a queasy feeling when you look at your credit card debt and say to yourself, "There's no way I'm ever going to do that again." But the funny thing is, most of us forget that regret over the course of the year and in the same place land again. But you don't have to.

The best way to avoid excessive vacation debt is to start saving for your next vacation now. You may have heard of a “vacation account” or a down payment Account – a special savings account designed for a specific financial goal. Why not open a “holiday expense account” right away?

Putting money aside each month serves a dual purpose: you don't have to face huge expenses all at once, and you have a clear picture of what's due holiday budget should be.

Sometimes we overspend during the holidays because we have no idea what a reasonable amount is to treat our loved ones – and then we pay for it (literally!) with overwhelming credit card debt. With good habits, you'll be ready to head into the upcoming holiday season with a solid plan.

How many people have credit debt?

You may feel (somewhat) better knowing that you are not alone. In fact, the average household with a credit card (and that's 189 million households) has over $8,000 at their disposal credit card debt, according to Debt.org.

You might not be surprised to hear that those with credit card debt weren't too concerned about digging the holiday spending hole a little deeper. More than 60% of those who already had outstanding balances on their cards said they didn't bother taking on additional debt for loved ones and the holidays.

How to pay off credit card debt

Vowing not to find yourself in the same situation of excessive holiday spending next year is a worthy goal — but that won't get you anywhere today. That is why you must now take steps to get out credit card debt.

Know what you owe

Start by assessing the damage. It may be painful, but the only way to put together a comprehensive plan is to know how much you owe, on which cards, and at what rates.

Create a table or Use an app like Mint tThis hat will help you add up your totals and identify the highest cards interest rate – these are the ones you want to cash out first.

Go on a detox

You heard about Dry January, when people vow not to drink alcohol in the first month of the new year? This strategy can also work for spending, by going cold turkey – not putting any more purchases on your cards until they're cashed out, or at least paid off.

You might even go one step further and literally put your cards on hold. Yes, freeze them so they're not even accessible.

Then, create a budget and withdraw the money in cash; Divide it into envelopes for your various expenses (grocery, entertainment, etc.) and when the envelope is empty, you're done with the expenses in that category. It's surprisingly effective, and this method can speed up your efforts to get out of credit card debt by using even more of your money to pay down your debt.

Find out if debt consolidation is right for you

If you're really serious about getting rid of your credit card debt, this is something you should think about debt consolidation, a method designed to lower your payments by getting you a lower interest rate. That means you can't just do it pay off your debts sooner, but you'll pay less interest along the way.

It means taking out another loan — which might be the last thing you want to do — but in many cases it's the financially smart choice. Debt consolidation might look like this:

You are providing financial information – don't worry; it's not intrusive.
You see which personal loan options you qualify for and you can choose the variables that work best for you; that is, the monthly amount of your payment, how long you will repay it (called the repayment period), and the interest rate.
Once you've found something you like, you'll need to provide slightly more detailed financial information.
Once you've been approved and agreed to the terms, your loan will be funded and you're ready to tackle your credit card debt!

Debt consolidation through a personal lender like Rocket Loans is just one option for getting out of credit card debt, but it can offer peace of mind and an easy, one-off payment that will help streamline your entire process.

If you're a homeowner and have equity built up in your home, you may also consider refinancing your mortgage to consolidate debt. Refinancing allows you to pay off your high-interest debt on your home loan at a much better rate than your average credit card. Depending on how much home equity you have, debt consolidation with a lender like Rocket Mortgage® could help you stay on track with one monthly payment instead of juggling the interest rate and payment dates of multiple accounts.

Ready, set, save!

If you haven't made any financial resolutions, make this year the year to ditch your credit card debt — and look forward to celebrating your success with smart holiday spending next year.

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Rocket Mortgage ( 7 Posts)

The Rocket Mortgage Learning Center is dedicated to bringing you articles on home buying, loan types, mortgage basics and refinancing. We also offer calculators to determine home affordability, home equity, monthly mortgage payments and the benefit of refinancing. No matter where you are in the home buying and financing process, Rocket Mortgage has the articles and resources you can rely on.

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