Managing credit card debt on parental leave
As new parents, there are a lot of things we’d all like to sweep under the carpet - full nappies, piles of laundry and credit card debt. It feels like they pile up as soon as you turn your back. But if you’re struggling with credit card debt on parental leave — or in the lead up to it — it’s better to tackle it head on sooner rather than later.
When it comes to money owing on your credit card, those interest payments add up fast.
In this article, we’ll examine credit card debt, given that 41% of Kiwis have it and Consumer NZ rates it as a top financial concern.
If you’re reading this article, chances are, you’re part of this 41%. Take heart in knowing you’re not the only one, and that there are steps you can take to manage it and improve your financial position.
Step 1: Know what you owe
This week, schedule half an hour to go through your most recent credit card statements and write down three key things:
The minimum monthly payment for each card (it’s typically found at the top of your credit card statement)
How much money you owe on each credit card (so you can game plan how to pay it off)
The interest rates you are paying (this determines how quickly additional fees will grow; it’s typically found at the bottom of your credit card statement)
Step 2: Minimum payments can cause maximum headache
The first rule of thumb is that it’s best to pay at least the minimum payment each month for each credit card. If you don’t pay the minimum payment, it can:
Negatively affect your credit score. This makes it more expensive for you to borrow in the future and could affect your ability to get a mortgage (you can learn more about your credit rating here)
Lead to paying late fees (usually around $20 if you haven’t made the minimum monthly payment by the due date)
Result in higher interest charges, as the interest each month is calculated on the outstanding balance
To illustrate how paying only the minimum payment can lead to a debt trap, a friend kindly shared this snippet from her credit card statement. She has $7,600 outstanding, and her bank charges 20.24% interest. By sticking to the minimum payment, it would take over 80 years to pay off the credit card and lead to over $50,000 in interest charges.
Source: Sample from a real credit card statement
Step 3: Plan your repayments
Once you have a clear idea of what you owe, it’s time to map out a repayment strategy. Here are some steps to get started:
Put money aside each payday
If you haven’t started parental leave, use every payday to chip away at your debt. Decide how much you can commit to, aiming above the minimum payment for each card. Then, use the Debt Repayment Calculator to see how long it will take to pay off each card based on your chosen payment amount.
For example, if you have $1,000 on your credit card with a 20% interest rate and can:
Pay $200 per month, it will take 6 months to pay off the card, and you will pay an additional $53 in interest.
Pay $80 per month, it will take 15 months to pay off the card, and you will pay an additional $131 in interest.
High interest rate = high priority
Prioritise credit card payments with higher interest rates (if you have more than one credit card), so you can shrink the extra interest charges.
If you have multiple cards, consider consolidating them into one loan with a lower interest rate. Learn more about debt consolidation here.
Step 4: What to do if paying debt isn’t an option right now
We get it — parental leave can be financially tough. If paying off your credit cards isn’t realistic right now, consider these options:
Consider a balance transfer credit card: You may be able to transfer your existing credit card balance to a new card with 0% or low interest for 3 to 24 months. You will still need to make minimum repayments, but the low-interest period can buy you some breathing room. Be aware of potential fees and plan to pay off as much of the balance as possible before the interest rate increases.
Explore other support options: If you can’t qualify for a balance transfer card or if you’re already struggling with minimum payments, reach out to your bank to discuss hardship programs or speak to a financial mentor for guidance tailored to your situation.
Key Takeaways
Pay more than the minimum whenever possible to avoid the debt trap.
Create a repayment plan that fits your budget and timeline using the Debt Repayment Calculator.
If paying off debt isn’t an option, explore balance transfer cards or speak to a financial advisor about debt management plans.
And finally, be kind to yourself. Financial stress can be overwhelming, especially when juggling the demands of parental leave. Reading this article is a great first step — now, schedule that half hour to review your credit card statements and start taking control of your debt.
Crayon’s Financial Baby Prep Program helps you prepare financially for going on parental leave. Ask your employer if they offer it as an employee benefit.
Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 13 May 2025.
