1: Get a grip

It is estimated that Americans will charge $148 billion to their credit cards during Christmas period. A new poll also found one in four Britons felt they were struggling with debt as the UK annual interest bill for credit hit £93bn Don’t just sit back and wait for the postman to deliver those credit card statements before you start to think about how you are going to pay them. If you have to borrow money to pay off your credit card debts, you’re in big trouble!

You also need to look at your debts objectively, if you are paying out between 15-20% of your monthly income on your debts than you need to revaluate your finances. If that figure is higher than 20%, you may need to enlist the help of a professional.

Financial experts say that paying off this year’s credit card debts are going to be particularly hard with rising fuel and food costs, allied to a double hit of rising mortgage payments and falling house prices.

2: Prioritize

There are many different types of debts you can have such as personal loans and mortgages. Credit cards may be one of the most convenient sources of money but is definitely one of the most costly. Credit card rates can vary from 14% to an unbelievable 35%.

If you realize that credit card debts are so expensive you need to prioritize this debt first. If you persist on just paying the minimum payment it could take you 30 years to pay off the debt. Considering most mortgages are base on a 25 year term, 30 years to pay off a credit card debt is not sensible financial management.

Ask yourself wouldn’t the money you save from your credit cards be better on funding a holiday or new car?

If you want to calculate how much interest you are going to pay with minimum payments use this rudimentary but effective method: Take your balance and multiply it by your APR. Take that number and divide it by 12. That’s the amount you will have to pay in interest.

If you could consolidate your credit cards debts into a low interest rate personal loan than this would save you a load of money. But make sure you rip up your credit cards or hide them away as you do not want to be in the same situation again.

3: Watch the rewards

Everybody likes presents or "rewards" but remember why they are giving you these rewards. Credit card companies team up with other providers to offer everything from air miles to points to spend at a retail shops but remember the reason for them giving you these rewards, it’s so that you spend more money!

If you have a balance on your credit card your monthly interest charge will far out weigh any benefit from these rewards.

Look at the rewards objectively, if you have to spend £40,000 or $75,000 to earn enough reward for a airline ticket that you would have cost you cost £800 its really not worth it. The moral of the story is that reward cards can be good for people who pay off balances in full and for those who use the card for business purposes but if you have balances that you are struggling to pay off, stay away from them.

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