More than two thirds of Australian credit card holders indulge in multiple bad credit card habits, potentially putting their financial futures at risk.
According to a new study from ME Bank, 70% of the 1000 credit card holders surveyed engaged in at least three of seven negative credit behaviours, putting them into the ‘poor’ category of credit card users.
- 27% admitted to typically not paying a credit card off in full each month
- 32% admitted to only paying the minimum on a credit card statement
- 31% admitted to buying an item that takes over six months to pay off, excluding special promotions
- 31% admitted to withdrawing cash from an ATM with a credit card
- 19% admitted to accepting a ‘balance transfer’ offer while keeping an old credit card active
- 42% admitted to concurrently having savings (outside an offset account) and credit card debt
- 75% admitted to not setting up an automatic transfer to pay a credit card balance in full each month
Of those surveyed, 75% of women were in the ‘poor’ category, along with 85% of millennials aged 25-39.
While 90% of those surveyed said they know how credit cards work, ME found that 38% incorrectly answered six credit card general knowledge questions (rising to 44% among women and 51% among Gen Zs aged 18-24):
- 44% did not know which credit card to pay off first when faced with multiple cards at different rates
- 41% thought all credit cards had an annual fee
- 35% did not realise missing a credit card repayment may affect their ability to get a home loan
- 33% thought having a credit card means they’re always in debt
- 27% thought credit card rates are set by the Reserve Bank of Australia
- 9% did not realise credit scores apply in Australia
ME general manager of cards and payments, Michael Hendricks, said that many people struggle to choose a credit card that suits their current financial circumstances:
“While 82% thought they had the right credit card for their particular needs, the survey highlighted that most would not select the credit card most appropriate for a given scenario. For example, selecting a rewards card (which typically charges higher interest rates) for a cardholder that normally doesn’t pay off their card in full each month.
“Banks could be doing more to educate credit card customers on how to choose and how to use credit cards.
“Only 60% said they find it easy to understand the information banks provide about their credit card products – this should be a lot higher given the risks and costs if not managed well.”