How to Recover From a Spending Spree
by Ellise Walsh

Even the most fiscally responsible people overspend sometimes. Whether you went overboard buying everything but the kitchen sink over the holidays, or over indulged on that long awaited vacation, there are steps you can take to get rid of those bills and become debt free once more.

The first step is to stop avoiding the problem or putting it off. Most people procrastinate when it comes to unpleasant tasks, and dealing with debt sits near the top of the list of unpleasant ways to spend your time. But the sooner you deal with your debt load, the easier it will be to fix. If you wait until you are unable to pay the minimums on your credit card balances, it may be too late.

Another important thing is to pay the credit card bills as soon as they arrive. It does not matter if the bill is not due for two weeks. Pay it the day it arrives. Not only will this get it out of your hair, but you are much less likely to forget to pay the bill if you deal with it right away. Remember that every late payment means a negative entry on your credit report. In addition, credit cards charge exorbitant fees for late payments, and that can get you even further in debt.

That brings us to the third step, and that is to make at least the minimum payment (preferably much more) on all your credit cards. If you are like most people, you have more than one card, and it is important that they all be paid on time. While you may not think that a late payment on one card will affect your other balances, you could be in for a rude awakening. Credit card companies routinely share information, both with the credit-reporting agencies and each other. A late or missed payment on one credit card could cause your interest rate to rise on all your remaining cards.

Step four is to look into transferring your high interest rate balances to a lower interest rate card. The lower the interest rate, especially for big balances, the easier it will be to pay off. If you get a low interest rate credit card offer in the mail, be sure to take advantage of it, and transfer as much of your high interest credit card debt to the new card as you can.

The fifth step is to free up as much cash as possible to put toward your high interest rate debt. If your interest rate is 18%, using excess cash to pay off the balance means you just made a risk free return of 18%. That kind of return is hard to find, so be sure to use any excess cash flow to pay off those credit card bills. If you have money hanging around in a low interest rate savings account, that money might be better used to pay off your high interest debt.

In many ways the last step is the most important, and that is to not repeat the mistakes that led you to get into debt. Next holiday season, be sure to control your spending and only purchase what you have the money to pay for. Be sure that the items you buy with your credit cards are true necessities. Controlling use of credit is a vital step to getting and remaining debt free.

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