Curing Credit Card Hangover

Have your dreaded January credit card statements left you reeling? Consumer correspondent Elisabeth Leamy lists her strategies to cure your credit hangover.

"Cut up all your credit cards
Credit cards give us a sense of possibility that we just don't have with cash. Just as an alcoholic can't drink a drop without relapsing, a credit card junkie shouldn't have any credit cards. Zero. Zilch."

"When safe, use a debit card instead of a credit card
A debit card allows you all the convenience of a credit card, with all the limits of your own bank balance. It's an excellent substitute."

"Keep just one card and freeze it!
If you believe you must have a credit card on hand in case of an emergency, I've got a creative suggestion for you. Cut up all but one credit card. Then take the lone survivor and drop it in a Tupperware container full of water. Pop the container in the freezer and put your credit card spending on ice! That way you'll have to think about it for several hours if you want to use the card. You're unlikely to thaw this consumer culture ice sculpture to make an impulse buy. But if you have a true emergency, it will be there for you."

"Impose a spending freeze
Not using your cards anymore really is the first step in paying them off. Most people who are in a credit card crunch charge their cards to the limit, pay the minimum each month, then spend right up to the limit again until they get their next bill."

"Send payments more than once a month
After you stop spending, you need to start paying. I began sending money to my credit card company even when I didn't have a bill due. I pre-addressed and stamped several envelopes so I had them ready. Anytime I had extra money in my checking account, I popped it in an envelope and kissed it goodbye."

"Use your savings account to pay off your credit card debt
Sound sacrilegious? It's ludicrous! I know, I know, you feel it's important to save for emergencies. Trust me, credit card debt is an emergency. But here's my less flippant explanation. If your savings account yields 3% interest and your credit card charges 19%, you can instantly 'make' a 16% 'profit' by using your savings account to pay off your credit card debt."

"Beware of debt consolidation loans
Reputable banks don't make debt consolidation loans to people with no collateral. If you own a house, you may be able to take out a home equity loan to pay off your credit cards. This option sounds great because you can then write off the interest you pay. But beware! Home equity loans come with closing costs, which just add to your debt. And there's a real risk here. Think of it this way: If you miss a payment on a credit card, you just lose your good credit rating. If you miss a mortgage payment, you could lose the roof over your head."