The majority of Aussie credit card owners are sitting on an average of $2,430 in debt, new research has revealed.
According to a new Finder survey of 1,015 people, 68 per cent of Aussies have an outstanding credit card balance, with a combined balance of$38.1 billion as of January this year.
Finder analysis of RBA data revealed that the total value of credit card balances was $38.1 billion in January this year.
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Gen X are the biggest spenders, carrying an average balance of $3,079, followed by Millennials with $2,624. Meanwhile, Gen Z carry an average of $1,571 on their credit card per person.
On the bright side, Australian credit card balances have fallen over the past year, down from an average of $3,274 in January 2020, according to a Finder analysis of RBA data.
Amy Bradney-George, credit card expert at Finder, said that many Aussies curbed their card spending during the pandemic.
“Frugal spending habits throughout the pandemic have helped Australians get on top of their credit card debt,” Bradney-George said.
“Many people were uncertain about their job security and cut back on non-essential spending so they could save more.”
3 ways to get on top of credit card debt
There are a number of practical and simple ways to reduce credit card debt, said Bradney-George, including balance transfer cards.
“Consolidating your outstanding balances into one account can make it easier to manage repayments,” she said.
“Zero per cent balance transfer cards can be a great way to merge your debts into a single card and avoid paying interest for a fixed period.”
Another thing to look out for is whether or not your credit card will allow you to set up an installment plan.
“Some credit cards also let you set up instalment plans so you can pay off part of your balance in fixed monthly amounts, usually with a lower promotional rate or fee,” Bradney-George said.
“Alternatively, cancel any cards you don’t use to reduce the temptation to spend and avoid paying excessive fees, and if you think you’re not getting a competitive rate try switching to a lower rate card.”
According to Finder, on average it takes Australians just over six months to pay off their credit card debt.
Millennials take the longest (7.4 months) to pay it off, while Baby Boomers pay it off the quickest (4.5 months).
According to Finder’s Consumer Sentiment Tracker more than a quarter of credit card holders (28 per cent) list their credit card as being one of their most stressful bills.
“If you or your loved ones are struggling with debt, seek professional help. The National Debt Helpline offers free financial counselling, which is really valuable when you need it,” Bradney-George said.
Buy now pay later
The overall reduction in credit card debt is a good thing, but Finder warns this also reflects the uptick in buy now pay later (BNPL) services like Afterpay.
“A lot of younger Aussies prefer the ‘certainty’ that BNPL seems to give them when it comes to showing how much their repayments will be,” Bradney-George said.
“But even though BNPL doesn’t charge interest, you can still be charged late fees that really add up over time.”
In 2018-19, missed payment fee revenues for all buy now pay later providers totalled $43 million, a 38 per cent increase over the previous year.
According to ASIC one in five Afterpay consumers (20 per cent) incurs late fees, with 67 per cent of those who incur late fees under the age of 34.