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Plan to pay off holiday debt

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The holiday season may have brought more cheer, but for many it also brought more debt. Shoppers added an average of about $1,000 in debt over the holidays. That's up about 2 percent from last year according to Magnify Money. And most people didn't plan on it.

 

"I didn't spend any more than usual but it's still a lot. It's always a lot.," says shopper Valeri Meyers. 

 

She admits the holiday spending plan doesn't always turn out as intended.

 

"I try to stick to like the debit card with using what I've got but inevitably the credit cards come out," Meyers says.

 

Researchers at Georgetown and other universities found the secret to paying off those credit card bills may be focus. They found people who targeted paying off one of several accounts were more successful than those who spread out repayments across their cards.

 

Researchers also found people feel a bigger sense of accomplishment when they pay off a more significant portion of their balance, meaning it's not about how much you repay, but how much of the balance is left.

 

"I try to pay more than the minimum balance or the minimum required," Meyers says. "So I try to do double what they're asking for the minimum and it pays it off a little bit faster."

 

Experts say if your credit cards have similar interest rates, pay down the ones with the smallest balances first. Also, consider a balance transfer card. You can often get a zero percent introductory annual percentage rate. Although there is a fee, it could work well if you can pay down the transferred balance each month before the rate expires.

 

Still, experts say this shopper's approach may be best.

 

"I use my credit cards as convenience but I pay off the bills right away," Andy Klein says.

 

But if you can't, have a plan.

 

To avoid credit card debt in the first place, research from the Urban Institute says using cash instead of plastic for small purchases can really make a difference. A charge card can add about 20 percent to an item's total cost because of interest.