Australians smash down their credit card debts to the lowest level since 2004
During the pandemic Australians have become hellbent on smashing down their credit card debts. Experts say these are the strategies to implement if you want to get it done quickly.
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Consumers’ distaste for credit cards continues as experts say they need to work out a strategy to wipe their debt once and for all.
During the pandemic Australians have become hellbent on smashing down their money owing on plastic and latest Reserve Bank of Australia showed in August $991 million was paid off.
The total balances now owing is $20.6 billion – the lowest level since 2004.
Despite this many credit card interest rates remain stubbornly high – some are more than 20 per cent – but experts say ditching plastic once and for all can only be a good thing.
Tribeca Financial’s chief executive officer Ryan Watson says the first thing those carrying card debt should do is chop up their card.
“Cut up your credit card so you can’t use it again until it is at least paid off,” he says.
“Then you should look at other banking providers who offer an interest-free period balance transfer – that way you can stop interest charges building up.”
Balance-transfer cards allow cardholders to transfer their debt from one card to another that doesn’t attract any interest for a set honeymoon period.
The idea is to pay off the debt during this time frame before it reverts to charge the customer with a hefty interest rate.
Watson says you should then set up a weekly or fortnightly transfer to begin paying down the debt.
Analysis by financial comparison website RateCity showed there are 15 cards offering rates under 10 per cent.
The site’s spokeswoman Sally Tindall says in these uncertain times “having credit card debt is an extra burden you just don’t need”.
“The sooner you pay it off, the less interest you’ll pay,” she says.
“If you’re going to kick your credit card debt, the first thing you need to do is stop adding to it.
“It’s also worth asking your bank if you can switch to a low rate card.”
Tindall says the next step is to work out a realistic strategy to pay back the debt.
The number of credit cards in Australia has fallen by 583,000 during the pandemic and is now at its lowest level since April 2008 at 13 million cards.