However, some people may be more motivated to pay off the card with the smallest balance, regardless of the interest rate. This method, sometimes referred to as “the snowball,” works the same way: it covers the minimum payment on all cards, but allocates your extra cash to the smallest balance until you pay it off, then move on to the next card. “I like the snowball method because you have immediate success,” said Melinda Opperman, president of Credit.org, a nonprofit financial counseling agency in Riverside, California.
If you are feeling overwhelmed and falling behind on your payments, you might consider seeking help from a nonprofit credit counseling agency. These agencies can help assess your situation and negotiate a plan with your card companies to allow you to pay off balances in installments, typically two to five years. In the United States, the National Foundation for Credit Counseling can help you take the first step.
How can I avoid overspending during the holidays?
Shoppers plan to spend nearly $ 1,000 this holiday season on gifts, food, decorations and other holiday-related purchases, according to the 2021 forecast from the National Retail Federation.
However, Opperman said many customers have told him they continue to pay for expenses they made with credit cards last year. She suggests focusing on enjoying time spent with loved ones during the holiday season rather than buying expensive gifts. He related that he asks his clients: “Do you remember what you gave to your sister or your brother last year?” They often don’t remember it, he said. But they do remember the game they all lived with or the dinner they enjoyed. “The memories of the time we spent with family and friends are more important.”
Jacobs recommends using your credit card only for items that you know you can pay for in less than a month. “If you don’t have the money to pay it up front, you shouldn’t buy it,” he suggested.
He also proposed to start developing an emergency fund, if possible, covering three to six months of day-to-day expenses. That way, you’re less likely to run into high-interest credit card debt if you suddenly have to pay an unexpected bill.
When it comes to the holidays, a basic method to avoid overspending is to come up with a plan for how much to spend before you go shopping, said Abigail Sussman, an associate professor of marketing at the University of Chicago Booth School of Business who studies how consumers make decisions. “It can be helpful to set a low spending goal,” he advised.