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Create a plan to tackle holiday credit card debt

Opening holiday presents is delightful. Opening the bills that are rolling in this month is anything but.

Instead of stashing those bills in a drawer, come up with a strategy for paying that new debt down quickly. "People feel better when they have a plan of attack," said Sarah Fouquart, group manager in the Jericho office of GreenPath Debt Solutions, a nonprofit credit counseling service.

Here are ways to address those bills and set the stage for a less stressful January 2011:

Do a damage analysis report for your credit cards, listing how much you charged in holiday expenses on each card, the amounts you already owed, how much you're already paying per month per card, and the interest rates, said Catherine Williams, vice president for financial literacy in the Chicago office of Money Management International, a nonprofit credit counseling program.

Then total up your holiday spending. Calculate how much extra you can squeeze out of your budget each month to put toward that total, and based on that, determine how many months it will take for you to wipe out the holiday portion of your debt, this as you make regular payments on the already existing balances. Ouch. This does sound painful, but without setting up and sticking to a time frame, "you just keep dragging around debt of Christmas past," said Williams.

Still, unless you have a healthy emergency fund, you don't want to throw all your money at the debt. Lisa Marino of Farmingville wipes out her holiday bills each year with bonus money and her tax return. "Then I vow to remain free of credit card debt forever," said Marino, 49, a project manager with a health insurance company. But, inevitably, some unanticipated expenditure comes up - say, new tires - and the cycle continues. She's expecting to break that cycle of spending, though, as last summer she set up an emergency fund for such surprises, to which she's been contributing $50 every other week.

You'll also want to start another kitty - this to sock away a small sum each month to cover the holiday bills that will inevitably come in next January, said Fouquart.

Those already saddled with debt who find holiday bills pushing them close to the edge can get free or low-cost help at credit counseling agencies. See the National Foundation for Credit Counseling - nfcc.org - and the Association of Independent Consumer Credit Counseling Agencies - aiccca.org.

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