Australians will ‘gift’ an estimated $10.7 million to their credit card providers in the form of extra interest revenue in January, new research has found.
Credit card users owe a massive $48.8 billion on their cards, with more than $34.2 billion accruing interest, latest Reserve Bank figures show. And RateCity estimates that plastic debts will balloon by 2 percent in January as the nation deals with Christmas spending hangovers.
Alex Parsons, CEO of RateCity.com.au, said the simple fact is we spend a lot more over the Christmas season on our credit cards than in other months.
“On average, January is the month where Aussies stack on the most credit card debt and it’s a good bet they’ll be higher again in January 2014 – for a start, there are over 200,000 more credit cards on issue than there were last Christmas,” he said.
Historical data shows January is the month when Aussies have the most debt on their credit cards at 2.21 percent extra debt compared with December, on average over the past decade. And this coming January is unlikely to be an exception, despite Australians scaling back on their spending in the past few years.
RateCity’s analysis has found the average credit card interest rate is around 17 percent, which means that nearly $11 million of extra interest will be paid from cardholders in the New Year because of festive spending.
“Some Christmas spending might feel OK when you put it on plastic, but it’s just as much of a debt as borrowing for a house or a car, and a lot more expensive in terms of interest rate,” added Parsons.
“Credit cards are generally a pretty good instrument if you pay them off every month, but, if you don’t, they are probably the worst form of credit you can have in terms of average interest rates that are attached to them.
“Interest rates on credit cards remain very high at around 17 percent on average, and range up to 22.99 percent, so consumers who carry debt should look at switching to get a better deal.”
RateCity currently lists several credit cards with an introductory rate of 0 percent for up to 12 months, and ongoing rates from 8.99 percent.