Credit card debt is mounting across the nation. Australians owe approximately $34 billion on their credit cards, according to the Australian Securities and Investments Commission (ASIC). For every cardholder, that’s about $4,400 debt.
National reliance on the plastic
“Almost one in three respondents [of a national survey] told us they find it difficult to get by on their current income, with one in five saying they have scraped through to payday by living off credit or borrowing from friends or family,” said Alan Kirkland, CHOICE Chief Executive.
While credit cards have their uses, it appears that flashing the plastic is becoming all too tempting for many Australians. For those making only the minimum repayments, it’s obvious that credit card debt may be costing a lot more money than just the original purchase price.
Alarmingly, a massive proportion of these mounting costs are thanks to interest.
How much is your credit card sucking up?
Looking at the ASIC figures, this begs the question — just how much money are Australians throwing away thanks to mounting credit card debit?
While credit card comparisons can help individuals secure competitive interest rates or switch to cards with no fees, diligent payments are essential in order to beat the wrath of interest, which can snowball over time.
For instance, a cardholder with the average $4,400 debt is going to take 22.5 years to pay off what they owe if making only the minimum repayments on a 15 percent interest rate. On top of this base figure, the debt would balloon to $10,462 in total.
However, if the same person paid $200 per month in repayments, they would pay of their debt in just over two years and save themselves $5,360 in interest.
Are there better ways to spend your money?
Instead of making minimum repayments, consider upping the ante in order to wipe debt faster. There’s a raft of ways you could better spend the interest you’ll save, too.
According to Visa’s 2013 Global Travel Intentions Study, Australians are some of the biggest spenders. On average, individuals from Down Under spent $4,118 on their last trip — a figure that’s predicted to lift by nine percent by these individuals’ next holiday.
It’s probably a safe bet that Australians would rather venture to the United States, Europe, Southeast Asia or elsewhere in the world, rather than paying off thousands of dollars worth of interest on their credit card debt.
There are more practical considerations, too. Australia’s Child Care Rebate helps families with childcare costs — up to half of out-of-pocket costs, up to $7,500 annually, per child, according to the federal government’s My Child website.
However, that’s only the tip of the iceberg. Parents are paying a lot more themselves to put their children into care in order to work, either part-time or full-time. This is all the more incentive to slash credit card debt.
Instead of racking up hefty interest repayments, you could be enjoying evenings out, too. According to the ASIC, Australian households spend an average $32 per week dining out, which amounts to $1,664 a year.
From holidays to childcare and everyday spending in between, there are plenty of things Australians would probably rather spend their hard-earned cash on! So be smart when it comes to your credit card repayments.