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Australians wipe a record $1.64 billion off credit card debts in May

Australians wipe a record $1.64 billion off credit card debts in May

New figures released today from the RBA show Australians wiped $1.64 billion off credit card debt accruing interest in May, the biggest monthly drop on record.

The figures show there are 1.22 million fewer credit card accounts, year-on-year, and people spent $5.82 billion less on their credit cards than in May 2019.

TOTAL CREDIT CARDSMay-20Apr 2020 vs May 2020May 19 vs May 2020
Number of accounts

13.4 million

-102,900

-0.76%

-1.22 million

-8.36%

Total balances accruing interest

$23.79 billion

-$1.64 billion

-6.45%

-$5.51 billion

-18.81%

Total value of purchases

$16.74 billion

$2.02 billion

13.75%

-$5.82 billion

-25.81%

Total value of cash advance

$324.47 million

$17.03 million

5.54%

-$244.72 million

-43.00%

Notes: excludes commercial cards, using original data from the RBA. Data released 7 July 2020

Sally Tindall, research director at RateCity, said Australians were getting on top of their credit card debt in April and now in May.

“People have taken the bull by the horns when it comes to paying off debt and cutting up their credit cards,” she said.

“In April and May, Australians have wiped almost $3.2 billion off the total debt accruing interest on credit cards. That’s a mammoth effort.

“COVID-19 has motivated us to take our personal finances more seriously. It’s one big positive to come out of this life-changing pandemic.

“The early access to super scheme is likely to have helped a lot of people to clear debts they’ve had hanging over their heads for years. However, pulling money out of your super shouldn’t be taken lightly, even if it’s to clear high-interest debt.

“The big question is whether these people will be able to stay debt-free from here on in.

“People who still have their cards are getting smarter about how they use them; spending less, paying off more and steering away from costly options such as cash advance,” she said.

Tips if you do access your superannuation:

  • Call a financial advisor or counsellor for independent advice.
  • Make sure you meet the criteria. There are fines of up to $12,600 for misleading claims.
  • Come up with a plan to put the money back into your super as soon as you can.
  • Take as little as possible and use the money wisely. This is your nest egg. Don’t see it as an opportunity to buy a new TV.

Note: Figures from APRA show $13.5 billion in payments were made under the COVID-19 superannuation early release scheme between April 20 and May 31.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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