New research* from Australia’s leading financial comparison site, RateCity, shows Generation Y are credit crazy, and spending up big.
The consumer study has revealed that Australians are now taking on debt earlier in life, with age 20 the new average age for young people to purchase their first credit card. This compares with the average age for older generations (such as those aged 65 years and older), which applied for their first credit cards at age 34.
Alex Parsons, CEO of RateCity.com.au, said it’s a worrying trend, given that young Australians are struggling with higher levels of debt.
“Our research shows 42 percent of young people under the age of 24 have between $10,000 and $30,000 of personal debt, not including a mortgage,” he said.
“Australians aged 24 and under are also four times more likely to get a weekly cash advance from their credit card than were their parents’ generation.
“More than half (56 percent) of Generation Y’s with a credit card have never had a $0 balance on their credit card in the last year, and 63 percent are not aware what interest rate they are paying. It’s a real concern, given that the average credit card rate is close to 17 percent – that’s a lot of interest we’re talking about there,” he said.
The number of credit cards on issue is on the rise with 117,000 incremental cards on the market compared to last year growing to 15.5 million in May (ABS May data), with Generation Y the most likely to sign up.
The RateCity research found 34 percent of people under the age of 34 have applied for a credit card online in the last six months.
Parsons said among the leading causes of the growth in credit appetite among young Australians was the shift in the way we use money.
“We’re becoming an increasingly cashless society and that is breeding new attitudes towards the disposable nature of money, which is increasing the ability to rack up debt,” he said.
“These are alarming new statistics and we think a number of factors are at play here, but regardless of the causes I’d urge young people to get in control of their money today to avoid a financial nightmare down the track – starting life in your 20s with tens of thousands of dollars can be crippling.”
*RateCity Consumer Study August 2014