How to pay off holiday debt

Holiday shopping can be hard. There's the frantic spending of Black Friday, the quiet obsession of Cyber Monday and something that's now being called Cyber Week. There's also all the other days when you're either virtually or physically running around trying to finish your holiday spending.

Deals abound. The perfect gift is either right there in front of you or right there in SFR's gift guide (see page 14). You can't pass it up. Or you want to be generous. Or that sweater would look better on you than on the rando aunt/uncle you see once a year, so why not grab it and get them something else?

All those deals still count as spending. And this is not 1948, so it's usually credit card country. And, too often, it's payday loan or title loan territory.

It doesn't have to be.

Banks and credit unions are equipped for this sort of thing, as are a select few stores. Sure, you might not have known the person approving your loan since you were a kid, but they're likely friendly enough.

What's more, old-school things like holiday savings accounts do exist.

"You start putting money away a year in advance," says Del Norte Credit Union's Kim Currie. "My goal was toward having a cash Christmas."

The account can be set up with an automatic transfer from your checking or savings account. At least at Del Norte, you can't touch it through an ATM or online banking (though you can still get at it in an emergency). Come Nov. 1, it's transferred into your account and you have money for the holidays.

"I know I don't have access to it, so it's not as tempting," Currie tells SFR about her approach to saving. "You've got to kind of play mind games with yourself."

Some banks drop the rates on their personal loans (also called signature loans or unsecured loans because you're putting down no collateral) during the holidays.

If you've already done your shopping and are stuck with a bunch of credit card debt, banks and credit unions sometimes run balance transfer specials in January. At Del Norte, for example, the credit union locks that debt at 5.9 percent APR until you pay it off.

As far as the stores are concerned, a few like Walmart have layaway plans, so it's worth at least asking if there's something on your list that costs more than you're prepared to spend right away.

What you don't want to do is fall into a predatory loan cycle. Those are the payday and title loan shops that are everywhere. New Mexico state law caps the rate on short-term loans like these—at 175 percent.

"Compare that to credit unions and traditional bank signature loans," says Cholla Khoury, who heads the consumer protection team at the New Mexico Attorney General's Office.

She also warns people to look closely at fees. "Always the first thing that we recommend that consumers do is check what it's going to cost to get the loan. No money is lended for free," she explains. While state law caps interest, things like origination costs and other fees can add up in a hurry. Her office routinely gets complaints about surprisingly high costs to obtain a loan.

Lastly, she warns about scams that require a bank deposit before you can get a loan. Or, though it may sound silly, buying a prepaid card at a store and giving it to someone over the phone or online.

"If they are requiring you to pay via gift card or prepaid card, it is a scam. And that is without exception," she says.