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Credit card use surges, 1.8m Aussies struggle to keep up with repayments

Aussie households are being warned about the dangers of mounting credit card debt.

The credit card market has made a resurgence in Australia as the cost-of-living crisis deepens further, but nearly 1.8 million Aussies are struggling to keep up with repayments.

Finder’s new Credit Card Report 2024 reveals that since April 2022, more than 356,000 new accounts have been established, signalling a shift in consumer behaviour towards credit cards as a financial-management tool.

Compilation image of credit cards and cash going down a drain.
The cost-of-living crisis is forcing more Aussies to use credit cards, and some aren't able to repay the debt. (Source: Getty) (Samantha Menzies)

Do you have a story to tell? Contact yahoo.finance.au@yahooinc.com

By August 2023, credit card spending in Australia had reached a record peak of $34.58 billion, underscoring the growing reliance on credit amid escalating living costs.

Aussies struggle to make repayments

The current economic environment has left nearly 1.8 million Australians struggling to keep up with credit card payments, reflecting the significant financial burden on a vast number of the population.

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The report shows that 13 per cent of credit card holders are unable to fulfil their monthly obligations and 2 per cent have defaulted on payments for more than 60 days.

Warning: Late payments of 14 days or more can be recorded on your credit file. Details of the late payment can stay on your credit report for two years, and while a single late payment is unlikely to affect your credit score at first, if you continue to not pay it or miss more payments it could have a serious impact. This can lead to higher interest rates on loans and make it harder to get approval for a new credit card or loan in the future.

But repayment rates are still improving

The good news is that even though Australia’s credit card spending is increasing, Aussies are getting better at paying off their balances. From 2000 to 2019, the nation saw a relatively stable trend, with the percentage of balances being paid off averaging below 50 per cent.

This began to shift in 2020, marking the onset of a positive trend towards higher repayment rates, and then gained momentum in 2022, culminating in a record-breaking repayment by November 2023, when 88 per cent of the previous month's balance was paid off.

And credit card users are becoming more cautious

Simultaneously, the national balance accruing interest has stabilised, currently standing at $18 billion, down from $29 billion in January 2020 and $37 billion in April 2012.

This stabilisation, coupled with the increased repayment rates, signals a cautious yet positive shift in credit card management practices among Australians.

Credit card usage chart
(Source: Finder)

As Australia continues to navigate the ongoing cost-of-living crisis, maintaining repayments is crucial. Paying off credit card balances in full each month not only mitigates the risk of falling into a debt trap but also ensures credit cards remain a valuable tool for financial management rather than a burden.

Take the challenge

To help navigate this year’s tough economy, Finder has launched a free New Year Financial Fitness Challenge, to improve your financial literacy and help you work towards achieving your money goals.

It has eight short modules to give you valuable insights and save you money on bills, loans and insurances and it includes a module on how to make the most from credit card rewards.

In fact, the average Australian can potentially save $11,200 in a year by doing the challenge, and if you don’t have a home loan, you can still potentially save $3,800 by taking part.

There’s no better time to give your financial products a checkup and make them work harder for your money.

Join the challenge today and empower yourself to make informed financial decisions, safeguarding your financial well-being for years to come. Let's embrace financial fitness together and pave the way towards a brighter financial future.

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