Smart Ways to Handle Holiday Credit Card Debt

It’s okay to have holiday credit card debt — it’s common. In fact, according to a recent survey by Lending Tree, 36% of Americans incurred debt due to overspending during the 2021 holiday season1. But if you don’t address your debt and simply make the minimum payment each month, it could hurt you financially. We want to help you handle your debt the right way.

Adjust Your Budget to Prioritize Debt

Due to the high interest rate of credit cards (the current average being 16.13% APR2), lowering your credit card debt should be priority number one. Rework your budget where you can in order to put more money toward your highest-interest debt. You want to lower that as fast as you can.

This could mean slightly adjusting your lifestyle. Less eating out, less shopping, less unnecessary spending. If you need help with creating a budget, explore the resources available to you through our partner, GreenPath™ Financial Wellness.

Don’t Add to Your Debt

Try to avoid using your credit card until your debt is more manageable. The key is to limit yourself to only buying what you need. Don’t get tempted by sales. If you continue adding to your credit card balance, it will make eliminating your debt much more difficult.

Eliminate Credit Card Debt By Consolidating with a Personal Loan

This one is all in the numbers. Let’s say you have $10,000 of credit card debt and your interest rate is near the national average of 16.17% APR2. If your strategy to pay off your credit card is to make the minimum payment each month, we instead recommend taking out a Personal Loan and using the borrowed money to pay off your credit card balance. You can then pay back your Personal Loan at a much lower rate to take advantage of big savings.

Here’s how it works:

Let’s say you had to charge $10,000 to a credit card that carries a 16% APR. If your minimum monthly payment was 2% of the balance, you would pay $200 a month.

$200 a month sounds pretty doable. However, if you never missed a payment, never used the card for anything else, and made only the minimum monthly payment, it would take you over 30 years to pay off the balance — and you’d pay over $18,000 in interest.

Or, you could use a Personal Loan to consolidate the $10,000 credit card balance. Let’s say you get a loan from Connexus with a 7.99% APR and a 60-month term. You’d still have a monthly payment close to $200 – but you’d pay off the loan in five years, and you’d pay only $2,083 in interest.

Using our example, you’d save over $15,000 in interest by consolidating! (Psst, plug in your credit card details on our nifty payoff calculator to find your own estimated payoff date.)

Keep in mind, you do this all without increasing your debt load. You’re just moving the debt from the high-interest credit card to the low-rate Personal Loan.

Start Preparing Now to Avoid Debt Next Year

The most popular strategy is to open a special savings account specifically for holiday shopping. For example, Connexus offers a Holiday Club Savings Account. This account allows you to deposit money throughout the year and access your savings on Oct. 1 before the holidays3. It’s a simple, effective way to save.

Holiday credit card debt is stressful, but it doesn’t have to be. Make a plan, use the tools available to you, and prepare for smarter spending next year. You can do it, and remember we’re here to help.

1 Source: (as of 01/11/2022).
2 APR=Annual Percentage Rate. National average credit card APR source:  Connexus Personal Loan Rates range from 5.99% APR to 18.49% APR and are effective as of 01/03/2022. Rates are subject to change. Minimum loan amount is $1,000. Maximum loan amount is $50,000. Individual rates and terms may vary based on application information, credit history, and selected loan term and amount and include all eligible discounts. Only the most creditworthy applicants qualify for the lowest rates and longest loan terms. Certain restrictions may apply. Not valid on tuition expenses and interest is not tax deductible. Loans currently financed with Connexus Credit Union are not eligible.
3 Preauthorized automatic transfers, telephone transfers or withdrawals, electronic banking withdrawals and transfers prohibited. Funds will be automatically transferred annually to the savings account on October 1.