Debt hangover lingers for millions, so how do you beat it?

Households straining under the weight of heavy holiday debts have ways to fight back. Here’s what the experts say.

Debt problems can impact peoples’ mental health. Picture: iStock

Christmas was exactly a month ago but the debt hangover continues for many households – potentially for the rest of this year.

Research has found that millions of Australians used credit cards to get through Christmas, and now is the time those bills come back to bite as interest-free periods end and interest charges can top 20 per cent.

However, there are ways to deal with lingering holiday season debt, and prevent similar problems occurring a year from now.

MyBudget director Tammy Barton says credit cards have been the “weapon of choice during the festive season” for many people.

“As January hits, a lot of people are staring down the barrel of post-Christmas credit card debt or buy now to pay later loans that they just won’t be able to afford to pay off,” she says.

“Others will be wondering how to pay their bills, let alone save.

“Managing lingering debt from the holiday season can be challenging but there is always an answer. You just have to start somewhere.”

Barton says strategies can include:

• Prioritising paying off high-interest debt – like credit cards – first.

• Having a plan for your money and using a budget to provide visibility and show where you may be able to cut back.

• Finding ways to save money, such as switching to cheaper brands and searching for bargains.

• Speaking with your creditors if you are financially strained.

“Generally speaking, many creditors may be willing to negotiate lower interest rates, waive fees or work with you to find a more workable repayment plan,” Barton says.

Drowning in debt? There are ways to fight back. Picture: iStock

Finance specialist Victoria Devine says one of the biggest impacts of spiralling debt can be on peoples’ mental health.

“Sadly money is what keeps the world going around and if you feel as though you don’t have control of your spending and finances it can impact every other area of your life in ways you can’t always see,” she says.

“The positive news is that you are always able to change your habits. Whatever you previously did can be changed and fixed. It is never too late, and you aren’t a bad person for overspending.”

Devine says recent Canstar research found about one in four people relied on credit cards through Christmas.

“We are looking at just over six million Aussies accumulating more debt over the holiday season,” she says.

“With a looming recession and increasing interest rates, it doesn’t come as a surprise that people relied on a credit card more this holiday season than they may have in the past.”

Devine says people should sit down and figure out exactly what they earn and owe.

“Put a strict cashflow plan in place which pays off your expenses and debts first, and then adjust your lifestyle accordingly,” she says.

“Paying off debt should be number one on your priority list.”

New research from Finder.com.au has discovered that almost half of Aussie credit card holders made an unplanned purchase on their card in the past year.

It found women are more likely than men to turn to plastic after running out of money before payday.

“Savings are being drained to cope with rising living costs, leaving credit cards as many people’s only option to get by,” says Finder credit card specialist Amy Bradney-George.

Finder.com.au’s Amy Bradney-George.

“The time people take to pay off holiday season debt is also a concern,” she says.

“Finder’s data shows around 600,000 people with debt think it will take a year or more to pay it off. As well as potentially high interest charges, that means there’s a risk they’ll still be paying it off when the next holiday season comes around and could spiral even further into debt.”

Bradney-George says people with lingering credit card debt should avoid making more purchases on it.

“As well as adding to your balance, most of the time you’ll be charged interest straight away when you carry over a balance,” she says.

DEBT-BUSTING TIPS

• Know where your money goes, by checking bank statements or building a budget.

• Avoid using the credit card that caused the financial pain.

• Prioritise paying off your highest-interest debt first.

• Consider transferring debt to a zero-interest balance transfer card.

• Seek help if you need it, through free financial counselling via the National Debt Hotline on 1800 007 007.

Source: Finder.com.au

Originally published as Debt hangover lingers for millions, so how do you beat it?