Table of Contents
Australian Credit Card Debt Surges Amid Rising Living Costs
Recent research indicates that millions of Australians are increasingly relying on credit cards as the cost of living escalates and mortgage rates remain high. The total credit card debt in Australia has surpassed $18 billion, marking the highest level in almost four years.
Key Findings from Finder Research
A study conducted by Finder revealed that over one million Australians have maxed out their credit limits and subsequently opened second credit cards. The average credit card balance for consumers now stands at $3,480. According to personal finance expert Sarah Megginson, the overwhelming pressure of living expenses has left many Australians with no option but to increase their credit card debt.
“With limited savings to absorb those higher costs, many Australians have had no choice but to take on more credit card debt to manage rising costs,” Megginson stated to Yahoo Finance.
Finder’s survey of 1,005 respondents discovered that 25% of Australians switched credit cards or obtained new ones within the past year. Among those, 10% sought new cards for rewards points, while another 10% aimed for lower interest rates. Additionally, 6% applied for balance transfers and 4% looked for cards with reduced transaction fees.
Rising Debt and Record High Transactions
In March, Australia’s credit card debt hit $18.13 billion, according to data from the Reserve Bank of Australia (RBA). Moreover, total credit card transactions increased by $382 million, or 1%, in just one month, culminating in a yearly rise of $1.2 billion, or 4%.
The RBA also reported that the average credit card interest rate in the past year was 18.49%. Consequently, Australians have incurred nearly $3.3 billion in credit card interest fees over the last year.
Jess Bell, a financial advisor from Findex, remarked that credit cards often receive negative feedback due to widespread misconceptions about them.
“I like to use it for my own cash flow in the way that any direct debits are done on credit cards, so I don’t have to think about it,” Bell explained to Yahoo Finance.
She shared her strategy of paying off her credit card balance in full each month, suggesting that it is crucial to maintain a smart repayment strategy to avoid accumulating interest.
Managing Credit Card Usage and Debt
While credit cards can be advantageous for some Australians, others may find themselves trapped in a “downward debt spiral.” Finder’s previous findings indicated that 13% of Australians had fallen behind on their credit card repayments. This included 8% who were 30 days late, 4% who fell 60 days behind, and 2% who were over 60 days late.
Missed payments often lead to late fees and additional interest charges, which can quickly escalate, alongside the potential negative impact on one’s credit rating.
Megginson stressed the importance of budgeting:
“It’s crucial for Australians to review their spending, create a realistic budget, and explore lower-cost credit options,” she advised. “A few smart moves now — like consolidating debt or setting repayment goals — can make a big difference in getting back in control.”
Conclusion
With rising living costs and high interest rates, many Australians are increasingly turning to credit cards for financial flexibility. While they can offer short-term solutions, it is vital for consumers to approach credit judiciously to avoid falling into debt traps. Regular budgeting and repayment strategies can be key steps towards regaining financial control.
For ongoing financial insights, follow Yahoo Finance on Facebook, LinkedIn, and Instagram.
