Discover how Aussies are setting themselves up for long-term 'debt disasters'!
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In the wake of rising living costs, many Australians—potentially without even realising it—are teetering on the edge of a perilous financial precipice.
With everyday expenses climbing, there is a concerning trend of increased reliance on credit to make ends meet, and it's putting a significant number of people at risk of what experts call a 'debt bomb disaster'.
The annual Finder Credit Card Report has delivered a sobering insight into the nation’s spending habits.
The report revealed that 13 per cent of credit card users—an estimated 1.8 million Aussies—have missed a recent payment due to increased cost-of-living pressures.
When payments falter, the consequences escalate rapidly.
Eight per cent of credit card users were 30 days late on their payments, and four per cent had missed a repayment by 60 days. An alarming two per cent were more than 60 days behind their due date.
'Missing a payment will usually incur a late fee and interest charges and these costs can quickly add up,' Amy Bradney-George, Finder's Credit Card Expert said.
Moreover, after 14 days, this misdemeanour will reflect 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.'
The situation is dire, with over 13 million active credit cards in Australia and an eye-watering $18.1 billion in interest-accruing debt.
The spending behaviour post-COVID-19 has surged, with Aussies spending almost $35 billion each month (20 per cent higher than before the pandemic), reflecting how households have become more dependent on credit.
Money’s Credit Card Expert, Brad Kelly, also shared that the average credit card holder transacts almost 22.7 times a month, spends around $115 each swipe, with a usual balance of $3043.
Though some companies claim to be able to 'fix' or 'clean' an undesirable record, a blemished credit history can't be removed,
Canstar, a financial comparison website, confirmed this: 'You cannot remove information that is correct from your credit report, even if it is negative information.'
'Additionally, in many cases, these companies charge high fees for something you can do yourself for free—such as fixing an error on the report.'
The reality is that once a serious infringement is recorded, it stays on file for up to seven years, while payment defaults stay for five years.
Furthermore, Canstar added that paying off old debts won’t remove the information.
'However, if you pay the debt, the credit provider should update your details to show it has been paid.'
'Lenders may look at paid defaults more favourably than unpaid defaults. However, it’s still important to remove defaults if they were incorrectly listed in the first place.'
Moneysmart shared several tips on how to improve one’s credit score.
They shared strategies like reducing credit card limits, limiting credit applications, punctual rent and mortgage payments, and avoiding missed bills.
'As you do these things, your credit score will start to improve. So, you’ll be more likely to be approved next time you apply for a loan or credit.'
For those already leaning on credit for daily expenses, Amy Bradney-George's advice is to aim to pay off the total balance each statement period.
'If money is tight, you also have the option of paying just the minimum amount listed on your statement. As long as you pay that by the due date, you can avoid late payment fees. But the more you can pay off the balance, the better.'
'Many credit cards also offer instalment plans for new purchases or for a part of your balance, which can help space out payments over a structured period of time.'
It’s also crucial that customers communicate with lenders if they foresee missing a payment.
'If you are upfront, you could get access to hardship arrangements which can give you flexibility around meeting repayments with fewer long-term consequences.'
What are your thoughts on this issue? Do you have any tips on how to stay on top of your finances? Share them with us in the comments below!
If you need a helping hand, there are accessible resources such as community legal centres and free financial counsellors—tap into these by contacting the National Debt Helpline on 1800 007 007 or seeking out Moneysmart's directory of organisations offering free legal advice.
With everyday expenses climbing, there is a concerning trend of increased reliance on credit to make ends meet, and it's putting a significant number of people at risk of what experts call a 'debt bomb disaster'.
The annual Finder Credit Card Report has delivered a sobering insight into the nation’s spending habits.
The report revealed that 13 per cent of credit card users—an estimated 1.8 million Aussies—have missed a recent payment due to increased cost-of-living pressures.
When payments falter, the consequences escalate rapidly.
Finder revealed that almost 13 per cent of credit card users have missed a recent payment. Image source: gpointstudio on Freepik.
Eight per cent of credit card users were 30 days late on their payments, and four per cent had missed a repayment by 60 days. An alarming two per cent were more than 60 days behind their due date.
'Missing a payment will usually incur a late fee and interest charges and these costs can quickly add up,' Amy Bradney-George, Finder's Credit Card Expert said.
Moreover, after 14 days, this misdemeanour will reflect 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.'
The situation is dire, with over 13 million active credit cards in Australia and an eye-watering $18.1 billion in interest-accruing debt.
The spending behaviour post-COVID-19 has surged, with Aussies spending almost $35 billion each month (20 per cent higher than before the pandemic), reflecting how households have become more dependent on credit.
Money’s Credit Card Expert, Brad Kelly, also shared that the average credit card holder transacts almost 22.7 times a month, spends around $115 each swipe, with a usual balance of $3043.
Though some companies claim to be able to 'fix' or 'clean' an undesirable record, a blemished credit history can't be removed,
Canstar, a financial comparison website, confirmed this: 'You cannot remove information that is correct from your credit report, even if it is negative information.'
'Additionally, in many cases, these companies charge high fees for something you can do yourself for free—such as fixing an error on the report.'
The reality is that once a serious infringement is recorded, it stays on file for up to seven years, while payment defaults stay for five years.
Furthermore, Canstar added that paying off old debts won’t remove the information.
'However, if you pay the debt, the credit provider should update your details to show it has been paid.'
'Lenders may look at paid defaults more favourably than unpaid defaults. However, it’s still important to remove defaults if they were incorrectly listed in the first place.'
Moneysmart shared several tips on how to improve one’s credit score.
They shared strategies like reducing credit card limits, limiting credit applications, punctual rent and mortgage payments, and avoiding missed bills.
'As you do these things, your credit score will start to improve. So, you’ll be more likely to be approved next time you apply for a loan or credit.'
For those already leaning on credit for daily expenses, Amy Bradney-George's advice is to aim to pay off the total balance each statement period.
'If money is tight, you also have the option of paying just the minimum amount listed on your statement. As long as you pay that by the due date, you can avoid late payment fees. But the more you can pay off the balance, the better.'
'Many credit cards also offer instalment plans for new purchases or for a part of your balance, which can help space out payments over a structured period of time.'
It’s also crucial that customers communicate with lenders if they foresee missing a payment.
'If you are upfront, you could get access to hardship arrangements which can give you flexibility around meeting repayments with fewer long-term consequences.'
If you need a helping hand, there are accessible resources such as community legal centres and free financial counsellors—tap into these by contacting the National Debt Helpline on 1800 007 007 or seeking out Moneysmart's directory of organisations offering free legal advice.
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