Many Aussies may have headed into the new year weighed down by hefty credit card debt, as the nation is predicted to have set a new record for credit spending over the Christmas period.
According to finder.com.au’s analysis of forecasted RBA data, Australians likely borrowed an incredible $29.7 billion on credit cards in December 2018.
Should this prediction ring true, this means an average $1,863 was made in purchases per card, the highest amount ever borrowed nationwide in the month of December.
Graham Cooke, insights manager at finder.com.au, said this is particularly concerning given that the rate at which Aussies indicated they would pay back their credit card debt last year suggests the interest alone on December’s debt could cost Australians a total $237 million.
“If the Christmas spirit is measured by consumer spending, we were all feeling very festive,” Mr Cooke said.
“This over-reliance on credit cards in December means the cost of Christmas is carried well into the new year and could take a toll on household budgets throughout 2019.”
He said that although, unfortunately, the debt cannot be reduced in the aftermath, there are means through which consumers can minimise the impact of interest charges.
“A balance transfer could give credit card holders the chance to make more headway on their outstanding balance, especially if they’re having difficulty making repayments,” Mr Cooke said.
“There are currently over 100 balance transfer cards offering 0 per cent introductory rates on transfers, and most banks offer a product with this feature.
“The interest-free period varies, but more than half of the balance transfer cards on the market will give you a whole year or more interest free if you transfer your balance.”
He said it is important for consumers to remember that there is a trade off in switching to 0 per cent balance transfer cards, as such cards usually have the risk of high purchase rates.
“Remember – this is not a licence to ignore your debt,” Mr Cooke warned.
“Often, 0 per cent balance transfer cards will have a higher purchase rate than other cards, so it’s important that you commit to paying off all your debt in the interest-free period, and resist the urge to spend beyond your means.”
Encouragingly, however, Australians appear to be getting better at paying off their credit card bills overall, as the average account balance accruing interest has fallen from $2,470 per card in 2012 to $1,984 by the end of 2018.
www.nestegg.com.au / “Credit card debt jumps to $30bn in Christmas rush” / Stephanie Aikins