Feeling a little guilty after splurging on your credit card(s) this Christmas?
You’re not alone in your credit card woes. In the past two decades, the amount owedby the nation collectively on credit and charge accounts has surged from $6 billion to almost $50 billion.
With the season of giving now over, it’s time to review four hard truths about credit card debt in Australia – and decide whether you need to re-examine your own financial situation:
- Many Aussies look at their credit card debt interest through rose tinted glasses. New figures by the Australian Bureau of Statistics show that about two thirds of all credit card holders are paying interest on their credit cards – but only one third are actually aware they are paying interest at all. As the saying goes, knowledge is power – make sure you know the exact terms of the interest rates on your credit cards to avoid any nasty surprises.
- In Australia, banks earn a greater return on credit cards than on home loans.Credit cards accumulate up to 9 per cent of profits for the big four banks, while the National Australia Bank earns only about a 1.3 per cent margin on home loans.
- Even when the cash rate is low, Australian banks don’t cut credit card interest rates. While home loan rates have echoed the lowcash rate since 2011, credit card interest rates remain steady.
- Credit card reward programs are not worth your while– unless you spend over $18,000 a year on your card. Yes, those flight and cash incentives might seem enticing, but membership often comes hand-in-hand with high annual fees and interest rates – so think twice before signing up.
Struggling to meet credit card repayments is a problem faced by many Australians. If you need credit card debt help and advice, or think you have reached the stage where a formal debt solution (such as filing for bankruptcy) is required, call the insolvency experts at Debt Free Australia on 1800 676 598.