JACKSON, MS (WLBT) - The holiday hangover: when all the gifts are given away, but the bills are lingering.
The problem is worse than you think: a NerdWallet survey finds that one in four Americans are still paying off the debt from Christmas 2017, and they overextended again in 2018. The scenario affects consumers of all income levels.
But 3 On Your Side has learned, there’s a way out for everyone too.
What if you always pay your credit card bills on time, but you’ve maxed out your credit limit?
“Transfer your balance,” says Michelle Way, a credit coach in Byram who teaches classes on understanding credit.
Way says, don’t be shy about transferring your balance to a card with zero percent interest. Imagine if your debt is $600. With a zero percent interest credit card, every penny of your payments will go toward that debt. “Opposed to, a 28.99 (percent interest), where only $10 or $15 is actually going to pay it off,” she says.
Such cards are not hard to find online. NerdWallet.com has a list. Your credit will be slightly affected by opening a new line of credit, but the benefit could outweigh the consequence.
The FICA pie chart explains how your credit score is calculated. Pursuit of new credit makes up just 10% of your score. But the amount of your debt makes up 30%. If you’re paying interest, your debt remains higher longer.
Way also says, asking your credit card company for a credit limit increase can help you. That’s because, that 30% of your credit score is also affected by how much of your credit limit you’re using. She says the secret is to keep your balance under 25% of your credit limit.
“As long as you’re keeping it under that percentage, you’ll be good to go,” she explains.
She says you can also call and ask that your interest rate be lowered.
What if you don’t have credit, and you’ve depended on easy loan services to finance holiday shopping? Way advises, stop that practice immediately and visit a bank.
“They have programs that can stop you from going to check cashing. At 5% interest," she says.
Citizens National Bank has what’s called a Scorebuilder Loan. As Community Development Director Tra Alford tells us, customers borrow a small amount, like $500. The bank holds it. The customer pays it back at 5% interest, building credit along the way.
“And at the end of 12 months, you’ve got 12 on-time payments that we report to the credit bureau. That helps you boost your credit score,” Alford explains. “The goal is here is not necessarily to put money in your pocket, but to change your mindset, to change the way you approach managing your credit, your finances.”
Useful tools to help you, whether you’re nursing that holiday hangover or not.