Yahoo Finance Cost-of-living crisis forces millions to turn to credit cards
Australia’s total credit card debt has decreased, despite more Aussies opening up accounts.
The rising cost of living is hitting households from every direction and an increasing number of Aussies are now turning to credit cards to help make ends meet.
Around 15 per cent of Australians have taken out a credit card in the past 12 months, while 7 per cent are in the market for one, new Finder research has found.
At least 6 per cent of people said they were relying on credit cards to cover their daily expenses, while 5 per cent were using credit cards to pay off previous debt.
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“Credit cards have become a financial crutch for a lot of people who would have previously only used one for emergencies,” Finder credit card expert Amy Bradney-George said.
“Mounting pressure on households is seeing Aussies borrowing money to keep afloat.”
Getting airline points (6 per cent) and travel perks like insurance (3 per cent) were the other main reasons why the equivalent of 3 million Aussies had decided to take out a credit card, the survey of 1,063 people found.
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While credit cards could have their perks, Bradney-George said it could also be easy to “go into a debt spiral” if you relied too heavily on them.
“If you’re regularly spending more than you can pay off on a credit card, the cost of interest charges can quickly add up,” she said.
Credit card debts drop
Although Australians are opening up more credit card accounts, the good news is they are also paying down more of their debts.
Australia’s total credit card debt decreased for the fourth month in a row, with the latest Reserve Bank data recording a drop of $158 million between August and September. The country’s total debt accruing interest is now $17.27 billion.
That’s despite there being almost 194,000 more credit card accounts compared to the same period last year.
Tips to pay off your credit card
If you have multiple credit card debts, one option to consider is a balance-transfer credit card.
“A balance transfer credit card can give you some breathing room by offering 0 per cent interest on the balance you move to the new card, sometimes for up to 32 months,” Bradney-George said.
But after that, a higher ongoing rate will apply if you haven’t paid off the whole balance so it’s important to have a plan in place.
Paying on time can also help you avoid extra interest charges and any late fees, as well as paying more than the minimum amount if possible.
Finder also suggests focusing on paying off one credit card at a time, beyond your minimum repayments. You could focus on either the one with the highest interest rate or the one with the smallest balance.
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