How to recover from holiday ‘debt hangover’

updated 4:14 p.m. ET Jan. 3, 2008

NEW YORK - As the credit card bills start rolling in this month from the recent holiday season, many consumers are going to get that queasy feeling that they've overindulged. There are antidotes for "debt hangover," experts say, but they require putting payment strategies in place — and sticking to them.

"I think some people are afraid of even opening up their bills," said personal finance expert Jennifer Openshaw. "But they have to stare Scrooge in the eye and tackle the problem head on. The more people do that, the more confident they'll feel — and the more they can do about it."

Consumers have a lot of card debt to deal with. Even before the 2007 holiday spending season began, Americans added more than $50 billion to their credit cards in the first 10 months of the year to reach a record total of $928.5 billion in October, according to the Federal Reserve. The additional spending in November and December undoubtedly pushed balances even higher.

Dick Reed, regional counseling manager with the nonprofit Consumer Credit Counseling Service of Greater Atlanta, said that January and February are the agency's busiest months.

"A lot of people make a New Year's resolution to get their financial house in order," he said. "But often, it's 'I spent too much on the holidays' that actually brings them in."

Reed said that the first step troubled borrowers have to take is to make sure they're current on their home mortgage or rent.

msnbc.com special report Click here to send in your comments about how money affects your relationships. We'll report the results of our exclusive ELLE/msnbc.com survey in March.

‘You need a place to live’
"No matter how bad things get, you need a place to live," he said.

The next step may seem obvious, but a lot of people don't take it, and that's to stop charging on your credit cards. If you don't do that, Reed said, "the bills will only get larger and the envelopes heavier and the stress greater."

Dealing with outstanding balances may require both increased cash flow and an aggressive repayment schedule, he said.

People who are heavily in debt may have to consider steps such as selling their second car, taking a part-time job on the weekends and slashing expenses for dining out and other optional purchases, Reed said. That will free up more cash to apply to debt, he added.
Payments should cover "more than the minimum" on every card — with any extra money applied to the card with the highest interest rate, Reed said.

MORE FROM HOLIDAY RETAIL

Holiday retail Section Front

Post-holiday sales aren’t saving the season How to recover from holiday ‘debt hangover’ Shoppers rush to stores before Christmas Shoppers ‘too little, too late’ to save season Final hours will be long ones for some stores Stores brace for last-minute gift card surge Maine: Why let unused gift cards go to waste? Holiday shoppers taking their sweet time U.S. may face foreign shopper hangover Consumers still spending on gadgets Holiday retail Section Front   Add Holiday retail headlines to your news reader: