Households credit card spending set to surge to $86bn this festive season
Cost of living pressures are causing Aussies to turn to credit this festive season, which experts predict could take years to pay back.
Aussies are spending up big this holiday period through their credit cards, with experts fearing it could take them years to pay off the debt.
A study by Canstar estimates Aussies will rack up an insane $86bn on credit across November, December and January, putting further strain on the household budget in the new year.
November is tipped to be the biggest spending month, with consumers estimated to have put $29.9bn on the credit card, mainly due to Black Friday sales. Spending on credit cards is tipped to fall slightly to $27.7bn before lifting to $28.6bn over January.
Canstar warns this huge spending surge is likely to attract a large amount of interest owed to the banks, as households traditionally struggle to pay back their spending within the interest free payment period.
The latest credit card statistics for October 2024 released by the RBA shows Aussies are collectively shelling out over $8.8 million in interest charges a day on a collective credit card debt of $17.45 billion, at the average interest rate of 18.51 per cent.
This is tipped to be even higher in January if shoppers can’t pay back spending on major shopping periods including Christmas, Black Friday and Boxing Day sales.
Canstar data insights director, Sally Tindall, says Australia’s total credit card debt on personal cards has risen every January for the last nine years as households struggle to pay off their Christmas spending before their interest-free days end.
“Whatever circuit breaker you choose, it’s going to sting, but clearing the financial and mental burden that comes with persistent credit card debt is likely to be well worth the pain,” Ms Tindall said.
“If your credit card is already bursting at the seams, take action before it really starts to unravel.
“After a long, tough year, it’s hugely tempting to let the purse strings go over summer, but the last thing you want is to start 2025 with a financial hangover that lasts for months, potentially even years.”
Beware the payment period
As households collate huge amounts of credit card debt, Ms Tindall says they should be aware of the payment cycle, as it could offer them an additional 11 days to pay back any money they owe.
Most credit cards offer customers time to pay back their purchases before charging interest, known as “interest-free days”.
For example, a purchase made on the first day of a 30-day billing cycle, the customer could have up to 55 days to pay that purchase back. However, if it was on the last day of the cycle they would only have 25. On a card offering “up to 44” interest-free days they would have just 14 days.
Although, anyone with money owing on their card is likely to find their interest-free days are null and void until they clear their credit card in full.
Ms Tindall also warns, shoppers using a big four bank rewards card only have up to 44 or 45 days to clear their debts.
While NAB and Westpac have not changed these recently, CBA and ANZ cut the maximum number of interest-free days from 55 to 44 in May and November this year, respectively.
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