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$40,000 in debt: Rising costs of living driving Aussies into the red

·4-min read
Swping credit card
People are reaching for credit cards to pay for increasing living expenses. (Source: Getty)

For Scott*, covering rent and bills for a family of four was hard enough without rising costs of living nudging him into debilitating debt.

His money troubles started when he moved closer to the city so his daughter could attend university.

Things were already tight, with Scott’s full-time role in manufacturing the family’s only source of income while his wife studied and cared for their son with a disability.

Expenses for the family ballooned when they moved closer to the city, plus their son reached the age where government support for him ended.

Combined with the rising costs of necessities such as petrol and food, Scott had no choice but to use credit cards and loans to pay for daily expenses.

“I started off with small personal loans and when that amount was exhausted, I got one credit

card and then I got another credit card to pay off that credit card and so forth,” he said.

The situation got worse when he started using buy-now, pay-later schemes.

“But once there was a number of these buy-now, pay-later payments running on top of all other expenses, there was no way I could keep up with the payments,” Scott said.

“It all snowballed pretty quickly to a stage where I had no idea how I was going to make the payments on just the credit cards and still pay school fees and other family expenses.”

Before long, Scott had racked up $40,000 worth of debt, triggering a serious depressive episode that landed him in hospital.

Scott has since got himself back on track with financial charity Way Forward to pay back his debts in manageable increments.

Aussies sliding into the red

However, he’s not the only Australian struggling to keep up with rising costs of living.

National credit card debt has risen for the fourth month in a row to $17.44 billion, according to Reserve Bank of Australia data.

RateCity.com.au research director Sally Tindall said family budgets were under pressure from rising costs of fuel and groceries.

“Credit card debt has ticked up for the fourth month in a row. While the rises have so far been relatively moderate, it’s a red flag some Australians are doing it tough,” Tindall said.

A recent Finder survey revealed the extent of Australia’s troubling relationship with credit cards.

Around 14 per cent of people have bought items impulsively, while 9 per cent have maxed out their credit card.

Around 12 per cent only pay the minimum amount each month and 11 per cent have made a late payment.

“If you only pay the minimum amount listed on your statement, you’ll be charged interest and that adds to the time it takes to pay the balance off,” Amy Bradney-George, credit card expert at Finder, said.

“If you can, pay the whole balance each month so you can make use of any interest-free days offered by your card. If you can’t pay the whole balance, whatever you can afford above the minimum amount can still help you save on interest charges,” she said.

RateCity.com.au offered some other tips to deal with credit card debt:

  • Call your bill providers (energy, telco etc) and ask for a temporary reprieve.

  • Cut back on non-essential spending until your credit card is back in the black.

  • Ask your credit card provider for a reduced interest rate or consider switching to a low-rate card.

  • An alternative is to switch your debt to a personal loan, which forces you to pay the debt back in full.

  • Once you’ve cleared your debt, consider dropping your credit card limit or cutting up the card altogether.

*Name changed to protect identity

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