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Credit card debt drops by $149 million as Australians start the year prudently

Credit card debt drops by $149 million as Australians start the year prudently

Australians have started 2021 paying $149 million off their credit card debt and taking the scissors to their cards.

The latest RBA statistics out today show balances accruing interest on personal credit cards dropped to $20.01 billion in January, following rises in November and December, in original terms.

Compared to January last year, the country’s overall credit bill dropped by $7.38 billion.

Many Australians put their wallets away in January after an expensive holiday season, with the value of credit card transactions down $5.32 million from December, a 22 per cent decrease in original terms.

The number of credit card accounts also declined, with more than one million closed year-on-year, hitting the lowest number since June 2007.

Credit card statistics: monthly and year-on-year changes

Jan-2021Monthly change

(Dec 2020 vs Jan 2021)

Annual change

(Jan 2020 vs Jan 2021)

No. of credit card accounts

                   12,747,986

Lowest since June 2007

-74,952
-1%

-1,030,492
-7%

Balances accruing interest

$20.01 billion

-$149 million
-1%

-$7.38 billion
-27%

Value of transactions

$19.28 billion

-$5.32 billion
-22%

-$2.87 billion
-13%

Source: RBA, released 8 March 2021, original data, excludes commercial cards.

As expected, debit card spending also dropped after Christmas, with transactions down $7.05 billion month-on-month to $33.81 billion on personal cards in original terms.

However, compared to the same time last year, the value of transactions rose $3.76 billion.

January debit cards: monthly and year-on-year changes

Value of transactionsJan-2020Monthly change

(Dec 2020 vs Jan 2021)

Annual change

(Jan 2020 vs Jan 2021)

Debit Cards

$33.81 billion

-$7.05 billion

-17%

$3.76 billion

13%

Source: RBA, released 8 March 2021, original data, excludes commercial cards.

RateCity.com.au research director, Sally Tindall, said it was good to see Australians getting back on track after two consecutive rises in credit card debt.

“It’s positive to see many Australians starting the year clearing some of their Christmas debt, although with over $20 billion still attracting interest, there’s a long way to go,” she said.

“At the end of last year, the rate at which people were closing their credit card accounts looked like it was starting to plateau. However, in January there was another rise in the number people closing their accounts, reigniting the exodus away from credit cards.

“While Australians tightened their belts in January after the usual Christmas splurge, overall spending on debit cards in particular was significantly higher than this time last year, another sign the economy is back on track.

“If you’ve got credit card debt attracting a double-digit interest rate, consider switching to a cheaper card or transferring your debt to a low-rate personal loan.

“While the average credit card rate is 17.43 per cent, there are 15 credit cards with interest rates under 10 per cent, including two of the big four banks,” she said.

Quick tips to pay off credit card debt 

If you're struggling with credit card debt, now may be the right time to consider making a plan to pay it off once and for all. Here are some tips that may help you lower your outsanding credit card balance:

  1.  Make a budget and stick to it.
  2. Consider consolidating your debt to a lower-rate card or balance transfer card.
  3. Lock your credit card away so you’re not tempted to spend more. 
  4. Consider lowering your credit limit.

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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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