A recent report on credit and card charges from the Reserve Bank of Australia reveals that at present we collectively owe around $49.3 billion on our cards – that's a drop of $1.25 billion over the last 12 months compared to $50.6 billion in June 2012.
Sounds impressive but it represents a reduction of just 2.5 percent against Australia’s total credit card debt. Clearly, there's still a long way to go.
Research shows the average Australian has more than one credit card and combined we pay an estimated $500 million each month in interest alone.
“Credit card debt is a real financial killer and that is why we all must still work hard to trim it back,” cautions Paul Clitheroe, founding director of financial planning firm ipac and chairman of the Australia Government Financial Literacy Board
“Switching to a lower rate card, or a taking up a balance transfer offer, may help consumers get ahead, but simply paying as much as possible off your card each month can be just as effective in clearing the debt sooner.”
RateCity data shows ongoing credit card rates range from 9.25 percent up to 22.99 percent, while 136 cards offer balance transfer deals from 0 percent for up to nine months.
“In addition, 32 cards offer introductory rates on new purchases from 0 percent also up to nine months so there is no reason why card holders should be wasting money on interest,” said Michelle Hutchison, spokeswoman for RateCity.
In addition to using a low rate card, Hutchison, also urges consumers to commit to paying more than the minimum monthly charge.
She says that by law, all monthly statements from credit card providers must provide cardholders with a warning about the impact of making just the minimum monthly repayments.
“If you check your credit statement, you’ll be horrified to see how making just the minimum monthly repayment can blow out the time it takes to pay off the debt and the interest repayments,” said Hutchison.
“Therefore make the review of your credit card statement a habit that not only ensures you’re not charged for additional transactions but it can be a great way to motivate you to pay your card off in full.
“Try and put as much spare money as you’ve got each month into your credit card debt and make a habit of doing this.”