Credit crunch: Aussies swipe plastic to surf the rising tide of living costs
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In today's economic climate, it's no secret that many Australians are feeling the pinch.
With the cost of living on a seemingly relentless rise, it's becoming increasingly challenging for individuals and families to make ends meet.
As a result, a significant number of Aussies are turning to credit cards as a financial lifeline; however, this could be a costly mistake.
Recent statistics painted a concerning picture: millions of Australians are adjusting their credit card limits to cope with the escalating cost-of-living crisis.
In January 2024, credit card spending in Australia hit a record high of $35.5 billion.
This surge marks a dramatic shift from the five-year downturn observed from May 2017 to April 2022.
The latest credit card report from Finder, which drew on aggregate data from the Reserve Bank of Australia (RBA) and insights from Finder’s Consumer Sentiment Tracker (CST), shed light on this trend.
Approximately one in five credit card holders—around 2.2 million people—have altered their credit limits in the past year.
A staggering 25 per cent of these individuals have done so because they're grappling with rising costs.
While some Aussies have increased their credit card limits to afford a more lavish lifestyle, a mere 4 per cent, others, about 3 per cent, have decreased their limits to curb spending temptations or to boost their chances of being approved for a home loan.
Graham Cooke, Finder's Head of Consumer Research, expressed concern over how the high cost of living has ‘exposed vulnerabilities in household finances’.
‘Some households have suddenly upped their outgoings significantly and are turning to plastic to cover the difference,’ he stated.
‘Aussies should be careful to keep track of spending on plastic and pay it off in full every month to avoid interest charges.’
The Finder report also highlighted a startling revelation about credit card rewards programs.
Nearly half of the credit card holders who collect rewards points struggle to meet the card's minimum spend requirements.
This struggle is real for 46 per cent of rewards point collectors, and one in eight people have confessed that while they managed to meet the spending requirement, they subsequently found themselves in debt.
‘Rewards credit cards can be an extremely powerful financial tool but can quickly become a nightmare if you can’t comfortably meet the minimum spend requirements,’ Mr Cooked warned.
He recommended that consumers thoroughly understand what types of spending are eligible for rewards points, as many are surprised to find that expenses like tax bills and car registrations are often excluded in the fine print of their contracts.
Moreover, he emphasised that the interest charged on late payments could quickly negate the value of any rewards earned, making it imperative for credit card holders to remain vigilant about paying off their balance each month.
As millions of Australians find themselves relying on credit cards to manage the ever-increasing cost of living, recent research shed light on a costly mistake that many may inadvertently be making.
This revelation underscored the importance of informed financial decisions, particularly for seniors who are navigating their way through economic challenges.
Have you found effective ways to stretch your dollar further? Do you have tips for others who might be struggling? We’d love to hear your insights and tips in the comments below.
With the cost of living on a seemingly relentless rise, it's becoming increasingly challenging for individuals and families to make ends meet.
As a result, a significant number of Aussies are turning to credit cards as a financial lifeline; however, this could be a costly mistake.
Recent statistics painted a concerning picture: millions of Australians are adjusting their credit card limits to cope with the escalating cost-of-living crisis.
In January 2024, credit card spending in Australia hit a record high of $35.5 billion.
This surge marks a dramatic shift from the five-year downturn observed from May 2017 to April 2022.
Finder’s latest credit card report found that millions of Australians are adjusting their credit card limits to manage the ongoing cost-of-living pressures. Credits: Shutterstock
The latest credit card report from Finder, which drew on aggregate data from the Reserve Bank of Australia (RBA) and insights from Finder’s Consumer Sentiment Tracker (CST), shed light on this trend.
Approximately one in five credit card holders—around 2.2 million people—have altered their credit limits in the past year.
A staggering 25 per cent of these individuals have done so because they're grappling with rising costs.
While some Aussies have increased their credit card limits to afford a more lavish lifestyle, a mere 4 per cent, others, about 3 per cent, have decreased their limits to curb spending temptations or to boost their chances of being approved for a home loan.
Graham Cooke, Finder's Head of Consumer Research, expressed concern over how the high cost of living has ‘exposed vulnerabilities in household finances’.
‘Some households have suddenly upped their outgoings significantly and are turning to plastic to cover the difference,’ he stated.
‘Aussies should be careful to keep track of spending on plastic and pay it off in full every month to avoid interest charges.’
The Finder report also highlighted a startling revelation about credit card rewards programs.
Nearly half of the credit card holders who collect rewards points struggle to meet the card's minimum spend requirements.
This struggle is real for 46 per cent of rewards point collectors, and one in eight people have confessed that while they managed to meet the spending requirement, they subsequently found themselves in debt.
‘Rewards credit cards can be an extremely powerful financial tool but can quickly become a nightmare if you can’t comfortably meet the minimum spend requirements,’ Mr Cooked warned.
He recommended that consumers thoroughly understand what types of spending are eligible for rewards points, as many are surprised to find that expenses like tax bills and car registrations are often excluded in the fine print of their contracts.
Moreover, he emphasised that the interest charged on late payments could quickly negate the value of any rewards earned, making it imperative for credit card holders to remain vigilant about paying off their balance each month.
As millions of Australians find themselves relying on credit cards to manage the ever-increasing cost of living, recent research shed light on a costly mistake that many may inadvertently be making.
This revelation underscored the importance of informed financial decisions, particularly for seniors who are navigating their way through economic challenges.
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