New Report Suggests Many Australians Are Struggling With Credit Card Debt

Post by Sharat on August 7, 2018 · Under credit cards · Comments Off on New Report Suggests Many Australians Are Struggling With Credit Card Debt 

A new report by ASIC has found that 18.5% of Australians are struggling with credit card debt. The outstanding credit card debt in Australia totals $45 billion with $31.7 billion of that incurring interest. ASIC Deputy Chair Perter Kell says the findings prove that credit cards can result in financial difficulties for many Australians. Other research suggests that one fifth of all cardholders in the country are in a long-term debt trap with 1 in 10 carrying credit card debt for over a decade.

Many people use credit cards to finance everyday spending

Whilst it is tempting to blame spendthrift behaviour, not all credit card debt is being used to finance holidays and cars. Nearly 40% of all card holders carrying credit card debt are using their cards to pay for everyday items such as groceries. According to ASIC, many people use cards that don’t fit their requirements. For example, some borrowers use cards with high interest rates when a low rate card is more suitable. ASIC estimates that card holders could have saved a combined $621 million a year had they used low rate credit cards.

Get a low interest card

It is important to choose a credit card that matches a borrower’s budget and spending style so that the card is more help than hinderance. ASIC also cast its beady eye over balance transfer deals and found that over the last five years, Aussies transferred $12.4 billion in balances. 53 per cent of Australians were able to reduce their debt by 10 per cent using balance transfers whilst 8 per cent were able to clear their debt completely. 32 per cent unfortunately saw their debt rise by 10% which is probably due to the fact that many of those people did not cancel their old cards after transferring their balance or used the balance transfer card for spending after transferring their balance.

Be responsible with credit cards

The average credit card balance is $4,400 and if a borrower were to make only the minimum payment, it would take them 16 years to pay off their balance and they would end up spending $7,000 on interest alone. If a borrower wants to pare their debt using a balance transfer card they should manage that card responsibly. This means they should have a plan in place to clear as much of the debt as possible before the interest free period expires and there should better management by ensuring there is no overspending and repayments are made on time.

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