Credit card holders not paying down debt: report

Credit card debt can cripple home ownership aspirations.

It’s the debt trap that could stop millions of Aussies from owning a home or being able to pay one off.

A new report has revealed a staggering 40 per cent of credit card holders, are not paying down their debt each month.

While 29 per cent admit they prioritise other expenses first, an alarming 11 per cent say they don’t pay down their credit card debt because they can’t afford to.

All up, that’s an estimated 2.2 million credit card holders who are not making progress on their balances accruing interest. And of course credit card interest rates are much higher than on things like mortgages or savings accounts.

The average credit card interest rate is 17.74 per cent, according to Canstar. So, for every thousand dollars you don’t pay back, you’re having to pay more than $170 in interest each month.

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Money.com.au figures estimate the total credit card debt in Australia to be at $42.42 billion, equating to average debt of $3500 per credit card account.

Of this, about half is being paid off each month, with an average of $1626 being charged interest.

That’s just shy of $290 a month in interest being paid by each credit card account. Money that could be used to invest in a borrower’s own home or investment property.

No amount of rate cuts by the RBA can get someone out of trouble if they are paying that much dead money to the bank in interest.

Richard Whitten, money expert at Finder, said credit card debt is a growing problem for millions of Australians.

“This cycle of credit card spending and debt can be incredibly stressful and quickly snowball, causing you to pay far more than you originally borrowed,” he said.

“Every month you delay paying off your card balance, you are essentially giving more of your hard-earned money to the bank in interest.”

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Finder’s money expert, Richard Whitten.

Whitten said when credit card debt is left unchecked, it doesn’t just affect your bank balance, it also impacts your ability to save and invest, and can also impact your credit score if you’re late making repayments.

“If you feel like you are chasing Peter to pay Paul and struggling to get on top of your credit card debts, remember that there is help available.

“If your debts are snowballing, you can contact the National Debt Helpline for free financial counselling.”

Whitten said you might also be able to move your credit card debt to a balance transfer card, which offers 0 per cent interest on the debt for up to two years.

“The key is to focus on paying off your credit card balance and avoid making new purchases with the card, otherwise you end up in the same debt cycle for years.

“Setting a repayment plan and removing the card from your wallet and phone can help you get on top of it.”

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