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Tips for Paying Off Your Holiday Credit Card Debt

The holiday decorations have been put away, the gift boxes recycled. Now it’s time to pay the cost of December’s gift and entertainment binge.

Many consumers had credit card debt even before the holidays. Average card balances climbed to $6,629 in mid-2019, up from $6,354 two years earlier, according to a report from the credit bureau Experian. The average debt “revolved,” or carried over, was 30 percent of the credit limit — the same as in 2017 — suggesting people are managing debt “responsibly,” the company said.

Still, with the average card interest rate about 17 percent, carrying a balance on a credit card is expensive. And many people probably added to their balances late in the year. The financial website MagnifyMoney found that just under half of consumers said they had taken on debt this holiday season — an average of $1,325, up 8 percent from last year — and most won’t be able to pay it off in January. (The online survey of 1,120 consumers was conducted just before Dec. 25.)

“If you can pay it all off in January, then no problem,” said Dave O’Brien, the head of the board of directors of the National Association of Personal Financial Advisors, a trade group for fee-only financial planners. If not, he said, make a plan to pay down the balances — by April, if you can swing it.

“Make the monthly payments high enough that it hurts,” Mr. O’Brien said.

Mark Wernig, principal at Dowling & Yahnke Wealth Advisors in San Diego and a spokesman for the Certified Financial Planner Board, which oversees standards for financial planners, said he also recommended paying off holiday debt in the first 90 days of the new year. He suggested using a simple paper calendar. That allows people to mark off the dates for payments as well as visualize the goal of finishing by the end of the first quarter.

“It needs to be confronted,” he said.

After creating a list of your card balances and their interest rates, Mr. Wernig said, try calling the card companies to ask if they’ll lower your rate. They may be agreeable, if you have a consistent payment history.

People with good credit, he said, might also consider consolidating their card debt by taking out a lower-interest personal loan. Similarly, they may consider opening a new credit card with a zero or low introductory interest rate and transferring high-rate balances to the new card. Bear in mind, though, that most balance transfer cards charge a fee of at least 3 percent of the balance you are moving. And you’ll need to be disciplined, advisers say, to avoid adding new debt onto the old cards.

Some credit cards, like American Express, offer the option of paying off part of a balance over time for a flat monthly fee, which may save you money and avoid the need to apply for a new credit card.

When you are ready to start paying off the debt, Mr. Wernig said, consider making payments biweekly, rather than monthly, to shrink the balance more quickly and reduce the interest paid.

If a three-month time frame means the payments are unaffordable, consider a longer-term plan. Perhaps divide the total debt by 12 and pay it off, along with the added interest, over the coming year, said Scott M. Buttfield, a financial planner in Red Bank, N.J.

Allen Purkiss, a financial planner in Ridgefield, Conn., said he occasionally saw clients who owned stock in their investment portfolios but were also carrying credit card debt. His advice to them is to sell some shares and pay down the card debt. No one knows what the market will do in the future, of course. But it may not be reasonable to expect recent double-digit market gains to continue, so using stock to get rid of high-interest card debt makes sense.

“In the current environment,” he said, “it usually makes sense to lower equity exposure and lower debt.”

Don’t have any stocks to sell? There are other options. Making extra cash by selling items you no longer need has become easier, with online options like eBay and local Facebook groups, said Cynthia Meyer, a financial planner in Gladstone, N.J. Focus on high-quality clothes or children’s toys in good condition, she said — and be realistic about how much people will pay for your used items.

Scour your card statements for subscriptions and services you don’t really need, Mr. O’Brien said. If you have an emergency cash account, he said, it may make sense to use at least part of it to pay off the cards. Or perhaps you have a tax refund coming that can at least partly offset your debt.

Cutting back on extra spending like restaurant meals and travel, and putting the money toward your card debt, can seem less painful in February, since it’s a short month. Observing an annual belt tightening — sometimes called “frugal February,” when people avoid restaurant meals or other splurges — can help you get back on track, Mr. O’Brien said.

If you have points on your credit card, January could be a good time to redeem them and apply them to your bill.

Taking out a home equity line of credit to pay off credit card balances may get you a lower interest rate, but you’ll probably pay fees to arrange it — and unlike card debt, the line is secured by your home.

“I’m not a big fan because ultimately you’re putting your home on the line and risking foreclosure” if you can’t make the payments, said Justin Pritchard, a financial planner in Montrose, Colo. He said a home equity line of credit should be reserved for emergencies, like a significant medical bill, rather than holiday spending.

The same goes for taking out a loan from your workplace 401(k) plan. Doing so means you may miss out on potential market gains, putting your retirement savings at risk.

Mr. O’Brien recommended a less drastic option: Temporarily reduce your retirement contributions and put the money toward debt reduction, then resume regular contributions — at a higher level — to keep retirement savings on track.

Here are some questions and answers about holiday debt:

How can I avoid running up debt for the next holiday season?

George Barany, director of America Saves, an initiative of the Consumer Federation of America, recommends regularly setting aside a small amount of money — even if it’s just $10 or $20 a paycheck — in a dedicated account, like the old Christmas Clubs, to avoid using credit cards at the holidays.

“Try to save automatically so you’re not in that same situation,” he said. If you have direct deposit, you can ask your bank to split your paycheck between a checking and savings account. (You can also set up automatic transfers yourself, if you bank online.)

Some mobile apps and banks offer new tools for making saving easier. KeyBank, for instance, offers Easy Up, an option that moves $1 into a savings account each time you make a purchase with your debit card.

Often, Ms. Meyer said, people plan well for recurring monthly expenses but stumble when setting aside cash for known but “irregular” expenses, like holiday spending and vacations. She suggested adding up all of those anticipated costs and setting aside a fixed amount for them each pay period to reduce the need to carry a balance on credit cards.

“Think of these things as part of your monthly budget,” she said.

Online budgeting tools can help. Wirecutter, a New York Times affiliate, recommends You Need a Budget.

And rethink your holiday budget if it has become a burden. Relentless marketing pushes people to meet expectations they can’t afford, Mr. O’Brien said, leaving them stressed and in debt.

“It’s a ridiculously expensive season,” he said. “And it wasn’t always this way.” Planning for more reasonable gifts, he said, can help set you up for success next December.

Should I always pay off the card with the highest interest rate first?

Some people may prefer to pay down the costliest balance first, while making minimum payments on the other cards. Then, when the first card is paid off, extra payments are shifted to the card with the next highest interest rate, and so on, until all balances are paid off. This approach can save the most in interest charges.

Others, however, may prefer paying off the card with the smallest balance first, regardless of the interest rate. The idea is that seeing a balance paid off imparts a sense of accomplishment and encourages you to keep on paying off your debt.

“It really depends on what keeps you motivated,” said Madison Block, a spokeswoman for American Consumer Credit Counseling, which advises people on debt reduction.

What if I’m struggling to make minimum card payments?

If you can’t see a realistic way to pay down your debt, you may want to seek advice from a nonprofit credit counseling firm. The firms typically offer free budget counseling and can also help negotiate — for a fee — debt management plans with credit card companies, which will allow you to pay off your debt at a lower interest rate over several years. To find a reputable firm, start by checking the Justice Department’s list of firms authorized to provide mandatory bankruptcy counseling.

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NYT > Your Money

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A 7-Eleven in Japan Might Close for a Day. Yes, That’s a Big Deal.

HIGASHI-OSAKA, Japan — Mitoshi Matsumoto, the most famous 7-Eleven convenience store owner in Japan, wants to do something unthinkable in his 24-hour, 7-day-a-week industry: Take a day off.

That’s why, he says, 7-Eleven is trying to put him out of business.

Mr. Matsumoto announced in November his plans to close up shop so he and his two full-time employees could take off New Year’s Day, Japan’s most important holiday, after years of working 14-hour days with few breaks. But on Dec. 20, 7-Eleven’s parent company told him that his store had received more customer complaints than any other in Japan. He had 10 days to address the issues, it said, or the location would be closed.

“They don’t want to let me take New Year’s off. That’s all there is to it,” said Mr. Matsumoto, 57, who has made a name for himself in Japan by publicly defying the company’s demands that franchisees stay open 24 hours. “If they allow me to do this, others will start rising up here and there.”

His decision in February to shorten store hours inspired other franchisees to demand that 7-Eleven allow them to do the same. But the company has been slow to change, he said, so he decided to take New Year’s off in protest.

The standoff has supercharged a national debate over the business practices of the country’s 24-hour convenience store industry. Japan’s declining population has made workers harder to find. Tales of punishing work schedules have struck a chord in a country that holds a sometimes lethal corporate devotion to working long hours.

Last year, the labor ministry approved 246 claims related to hospitalization or death from overwork, according to government statistics, which show the retail industry as one of the biggest sources of complaints. Another 568 workers took their own lives over job-related exhaustion.

But even as convenience store owners are suffering under increasingly long hours, the country’s three biggest convenience store chains — 7-Eleven, Lawson and FamilyMart — have been reluctant to change the 24-hour schedule that Japanese shoppers have come to expect.

In a letter to Mr. Matsumoto, 7-Eleven said it received 78 complaints about his store this year. In a statement, it said that the threat to sever the contract was based on the complaints and on the “destruction of the relationship of trust” caused by his criticisms on social media of 7-Eleven’s management.

Mr. Matsumoto and his supporters say 7-Eleven is trying to make an example of the man who has become the face of the resistance against a company that they say exploits their labor.

“Owners can’t organize, because the second you try, they home in on you and apply pressure,” said Reiji Kamakura, the leader of the Convenience Store Union, a small group that has struggled to gain members and change industry practices in the face of corporate opposition.

Though it got its start in Texas in the 1920s, 7-Eleven has been controlled by a Japanese company since 1991. Today, it operates nearly 40 percent of Japan’s more than 55,000 convenience stores.

That makes 7-Eleven an integral part of Japanese life. The government considers convenience stores part of the country’s infrastructure, like highways and sewers. They are expected to help promote regional tourism and to help with local policing by offering a safe place for people to flee to. Its stores can be called on to help distribute aid and supplies during a natural disaster.

The vast majority of Japanese 7-Elevens are owned by individuals like Mr. Matsumoto. The company provides them with a storefront and access to a logistics network that keeps its shelves full of rice balls, cigarettes and boxed lunches. It sets operating procedures with an eye toward protecting the brand and providing a uniform customer experience.

Among those demands, it tells franchisees to keep their stores open 24 hours a day, seven days a week, 365 days a year.

The model, pioneered by 7-Eleven, worked well enough for years. But about a decade ago, it began to break down.

Hungry for growth, 7-Eleven and its competitors began a war of attrition, flooding the country with more locations in an attempt to steal market share. Each new shop cut into its neighbors’ profits.

At the same time, Japan’s labor pool was shrinking, driving up hourly wages and making it difficult to find reliable workers. Many franchisees — who are responsible for paying their staff’s wages — were forced to work more of their own shifts.

For 7-Eleven, the cost of opening new stores was minimal. But for many franchisees, the numbers no longer added up.

Mr. Matsumoto, a former carpenter, opened his store in 2012, hoping to earn a more stable income. From the beginning, he said, he locked horns with the corporate management, refusing to follow suggestions from his regional manager about how much food to order or what items to stock.

In May 2018, his wife, who had also worked at the store, died. He began having trouble finding reliable staff. In desperation, he asked his son to come home from college to help.

Even so, Mr. Matsumoto was working 12-hour shifts. And sometimes much more.

Then, one day in February, he told 7-Eleven he was going to shorten his store’s hours from 6 a.m. to 1 a.m.

The company said that would violate his contract. He would lose his store and the tens of thousands of dollars he had invested in it. On top of that, he was told, he would have to pay the company a penalty of about $155,000 for breach of contract.

Mr. Matsumoto did it anyway. When the company threatened to close his store, he went to the news media.

Activists had tried to draw national attention to the plight of convenience store owners for years. But something about Mr. Matsumoto’s story touched a nerve. Japanese reporters descended on the store. Letters of support and phone calls poured in from convenience store owners around the country, he said.

Mr. Matsumoto admits he has received his fair share of customer complaints. He has sparred with people who he says left their cars for too long in the store’s small parking lot. He closed the bathroom to the public — a move virtually unheard-of in service-friendly Japan — because customers were not keeping it clean and sometimes locked themselves inside for hours. But in the past, he said, 7-Eleven’s regional staff worked with him to resolve the issues.

That wasn’t the case this time, he said. When he asked to see the complaints against him, he said, the company showed him only a few, saying there were too many to give him a complete accounting.

In its statement, 7-Eleven said that it had “repeatedly explained to the owner the actions that were in violation of his contract,” adding that he had yet to take action to correct them.

He suspects his activism played a part in the complaints. After his story went viral, people began to attack him on Twitter, accusing him of smearing the company’s image. His store has 270 reviews on Google Maps, many attacking his character. Virtually all of them were written after he appeared in the news.

Speaking privately, some 7-Eleven owners and employees say they admire Mr. Matsumoto, but few are willing to put their own shops on the line.

Nevertheless, the public outcry has given them some hope that the industry will change. Major chains have pledged to introduce some reforms. 7-Eleven has said it will experiment with allowing a few shops to reduce their hours. It pledged to give this New Year’s Day off to employees at 50 locations it operates directly.

Mr. Matsumoto hopes that franchised stores will close, too, in an expression of solidarity.

He met with representatives from the company on Sunday, but the two sides were not able to come to a satisfactory agreement, he said. Mr. Matsumoto said that if 7-Eleven went through with its threat, he planned to go to court.

The current system cannot survive much longer, he said, but 7-Eleven will not change unless the owners force it to. So far, no one has come forward.

“If we don’t take a stand now,” he said, “there’s no future.”

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NYT > Business