Fifth consecutive increase in credit card debt a sign if the times

In a sign of the impact of the rise in the cost of living, more Australians are turning to their credit cards to make ends meet.

Cost of living and interest rate rises have sparked the fifth consecutive increase in Australians’ total credit card debt.

Cost of living and interest rate rises have sparked the fifth consecutive increase in Australians’ total credit card debt in a sign more families were starting to “crack under the pressure” and turn to the plastic to make ends meet.

Data released on Tuesday by the Reserve Bank showed the total credit card bill attracting interest charges increased by $270m to $17.75bn in February – the highest level since August 2021 which was in the middle of the Covid pandemic.

RateCity.com.au research director Sally Tindall said more Australians were finding it difficult to make ends meet.

“Some Australians are starting to crack under the pressure of rising costs and RBA rate hikes as they reach for the credit card to make ends meet,” she said.

“Many families’ budgets have been pummelled from multiple fronts over the last few months as the cost of just about everything goes through the roof.

“While the credit card can be a bridge to get through to the next payday, it’s a bandaid solution that can quickly come unstuck.”

According to the RBA Australians spent less on their debit and credit cards in February, albeit slightly, dropping by $435m (-0.6 per cent) to $72.71bn in seasonally adjusted terms, despite the fact the cost of goods and services continued to rise.

The number of personal credit cards in circulation rose 28,744 in February to 12.48 million.

Ms Tindall said credit cards might seem like the only way to get through the month, but there were other options to combat the rising cost of living.

“Shopping around for supermarket specials, renegotiating your energy and other bills, and taking up any concessions and rebates you may be eligible for can all add up to big savings,” she said.

“If you are up to your eyeballs in credit card debt, pull the pin. One option is to switch to a personal loan, where are you are forced to pay it back in regular chunks and avoid the temptation to rack up more debt,” she said.