Are soaring living costs pushing millions into credit card debt?
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Times are tough for many households due to the cost of essential items soaring.
From groceries to rent, fuel to utilities—everyday expenses are rising fast and putting pressure on already stretched budgets.
As a result, more and more Aussies are now turning to credit cards to help get them through these tough times.
Research by Finder has revealed that 15 per cent of Australians have taken out a credit card in the last 12 months, while 7 per cent are in the market for one right now.
Meanwhile, the number of people relying on their credit cards to cover daily expenses is at 6 per cent, and those that use it to pay off previous debt stand at 5 per cent.
'Credit cards have become a financial crutch for a lot of people who would have previously only used one for emergencies,' Finder’s credit card expert Amy Bradney-George said.
'Mounting pressure on households is seeing Aussies borrowing money to keep afloat.'
The survey conducted by Finder of 1,063 people also showed that one of the reasons Australians are taking out credit cards was mainly to collect airline points (around 6 per cent). At least 3 per cent are looking forward to the travel insurance and other perks credit cards can offer.
However, Bradney-George warned that relying heavily on credit cards could make it easier for people to ‘go into a debt spiral' if they’re not careful.
‘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 warned.
Reduced Credit Card Debts
The country’s total credit card debt continuously declined for four consecutive months, according to the Reserve Bank.
It has recently reported a drop of $158 million in total credit card debt in Australia, recorded between August and September, with the country’s total debt-accruing interest of $17.27 billion. However, this decrease also comes despite the fact that there are almost 194,000 more credit card accounts compared to the same period last year.
Now, if managing multiple credit card debts has become a challenge, consider opting for a balance-transfer credit card.
As Bradney-George explained, ‘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.’
However, a higher ongoing rate will apply if the whole balance hasn’t paid off, so it’s crucial to plan your expenses using this card.
Bradney-George also suggested having another card to ease the burden of payment.
Paying on time will help to avoid extra interest charges and late fees, and paying more than the minimum amount, if possible, can also lighten the burden.
Another pro-tip from Finder is to pay one credit card at a time beyond the minimum repayments.
Choose one credit card with either the highest interest rate or the smallest balance, and focus on paying that one off over the others.
Members, do you also use credit cards to pay bills or do groceries? How are you coping with the current cost-of-living crisis? Let us know in the comments below!
From groceries to rent, fuel to utilities—everyday expenses are rising fast and putting pressure on already stretched budgets.
As a result, more and more Aussies are now turning to credit cards to help get them through these tough times.
Research by Finder has revealed that 15 per cent of Australians have taken out a credit card in the last 12 months, while 7 per cent are in the market for one right now.
Meanwhile, the number of people relying on their credit cards to cover daily expenses is at 6 per cent, and those that use it to pay off previous debt stand at 5 per cent.
Aussies have been relying on credit cards due to the cost-of-living crisis. Credit: Unsplash
'Credit cards have become a financial crutch for a lot of people who would have previously only used one for emergencies,' Finder’s credit card expert Amy Bradney-George said.
'Mounting pressure on households is seeing Aussies borrowing money to keep afloat.'
The survey conducted by Finder of 1,063 people also showed that one of the reasons Australians are taking out credit cards was mainly to collect airline points (around 6 per cent). At least 3 per cent are looking forward to the travel insurance and other perks credit cards can offer.
However, Bradney-George warned that relying heavily on credit cards could make it easier for people to ‘go into a debt spiral' if they’re not careful.
‘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 warned.
Reduced Credit Card Debts
The country’s total credit card debt continuously declined for four consecutive months, according to the Reserve Bank.
It has recently reported a drop of $158 million in total credit card debt in Australia, recorded between August and September, with the country’s total debt-accruing interest of $17.27 billion. However, this decrease also comes despite the fact that there are almost 194,000 more credit card accounts compared to the same period last year.
Now, if managing multiple credit card debts has become a challenge, consider opting for a balance-transfer credit card.
As Bradney-George explained, ‘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.’
However, a higher ongoing rate will apply if the whole balance hasn’t paid off, so it’s crucial to plan your expenses using this card.
Bradney-George also suggested having another card to ease the burden of payment.
Paying on time will help to avoid extra interest charges and late fees, and paying more than the minimum amount, if possible, can also lighten the burden.
Another pro-tip from Finder is to pay one credit card at a time beyond the minimum repayments.
Choose one credit card with either the highest interest rate or the smallest balance, and focus on paying that one off over the others.
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