Australians are feeling the financial squeeze like never before, and for more than a million of us, the pressure has pushed credit cards to their absolute limit.
With the cost of living soaring and mortgage rates refusing to budge, it’s no wonder credit card debt has ballooned to a staggering $18 billion—the highest it’s been in nearly four years.
If you’ve found yourself reaching for the credit card a little more often lately, you’re certainly not alone.
According to new research from Finder, over one million Australians have maxed out their available credit and, in a bid to keep their heads above water, have opened a second credit card.
The average balance per consumer now sits at $3,480—a figure that’s enough to make anyone’s wallet wince.
Why are so many Australians maxing out?
Finder’s personal finance expert, Sarah Megginson, explains that for many, everyday expenses have simply outpaced their earnings.
‘With limited savings to absorb those higher costs, many Australians have had no choice but to take on more credit card debt to manage rising costs,’ she says.
It’s not just about survival, either. Finder’s survey of 1,005 people found that one in four Australians had either switched credit cards or added a new one in the past year.
Some were chasing rewards points, others were hunting for a lower interest rate, and a few were looking to transfer their balance or reduce transaction fees.
But whatever the reason, the end result is the same: more Australians are relying on credit to get by.
The numbers behind the credit card
The Reserve Bank of Australia’s latest data paints a sobering picture.
In March alone, credit card debt rose to $18.13 billion, with spending hitting new record highs.
The total value of credit card transactions jumped by $382 million in just one month, and by $1.2 billion compared to the same time last year.
And here’s the kicker: the average credit card interest rate over the past year was a whopping 18.49 per cent.
That means Australians have forked out nearly $3.3 billion in interest charges in just 12 months. Ouch.
Credit cards: Friend or foe?
It’s easy to see why credit cards get a bad rap, but as Findex financial advisor Jess Bell points out, they’re not inherently evil.
‘I like to use it for my own cashflow in the way that any direct debits are done on credit cards, so I don’t have to think about it,’ she says.
The key, she stresses, is to pay off the balance in full each month and to forecast your bills with a buffer for unexpected expenses.
The real danger comes when you treat your credit card like free money.
If you’re not putting money aside to cover your spending, it’s all too easy to fall into a ‘downward debt spiral’.
Finder’s research found that 13 per cent of Australians have fallen behind on repayments, with 8 per cent at least 30 days late, 4 per cent 60 days late, and 2 per cent more than 60 days behind.
Missed payments mean late fees, more interest, and a hit to your credit score—a triple whammy that can be hard to recover from.
A word to the wise
Credit cards can be a useful tool if you use them wisely, but they can also be a fast track to financial stress if you’re not careful.
As Sarah Megginson says, ‘A few smart moves now—like consolidating debt or setting repayment goals—can make a big difference in getting back in control.’
What are your thoughts on the current state of credit card debt in Australia? Have you found any strategies helpful in managing your own finances during these times? We invite you to share your experiences or advice in the comments below. Your insights could be valuable to others facing similar challenges.
Also read: Centrelink debt repayment changes hit Australia Post on 12 June
If you’re young, pay off the credit card first & except for bills, don’t buy anything unless you’ve saved for it. It’s amazing what you don’t need & how good it feels after waiting/saving for it.
Problem is that too many people do not keep track of their credit card debt. I hear it all the time in shops “would you like a receipt?” …”No it’s OK thanks” I always get a receipt and then record the spend. I could tell you at any time what my balance is. I am 78 years old and must do this because I live on a government pension.
And do a budget for the bills.
My suggestion is to only have a Debit Card until you are 25 years old.
If you NEED something, save up for it and pay cash.
If you WANT something, think about it, then save up and pay cash.
I’ve been on a pension for many years, and I’m not ‘eligible’ for a credit card. The banks don’t like to ‘take a punt’ on a pensioner, even with money behind them, like super, term deposits, etc.
I have wondered what happens to someone if they just ignored demands for payment for that sort of debt – I mean after all they don’t get executed or something like that do they- there is an old saying: if you owe the bank whatever, say thousands then you have a problem, if you owe the bank millions then the bank has a problem