Key Points
- New research has found more than 1 million Australians have missed a credit card repayment since October.
- Six per cent of Australians use credit cards for daily expenses, and 5 per cent to cover previous debt.
- Reliance on credit cards carries risks when it comes to repayments, interest charges and credit scores.
Amid inflation, and cost of living struggles, millions of Australians are unable to make credit card repayments, according to new research.
More than half of Australians are only just making ends meet, , with more than 60 per cent of those facing financial stress reporting higher levels of food insecurity than those who are financially comfortable.
One in eight credit card holders have missed a repayment in the past three months, according to comparison site Finder's 2024 Credit Card Report, with 13 per cent missing a repayment by 30 days or more.
That works out to 1.75 million Australians who have missed a payment since October.
Research found 8 per cent missed a repayment by 30 days, 4 per cent missed a repayment by 60 days and 2 per cent had missed a credit card repayment by more than 60 days.
With 13.4 million credit cards circulating in Australia, they’re netting a national debt accruing interest of $18.2 billion.
An earlier report by Finder in November found that 15 per cent of Australians had taken out a credit card in the previous 12 months, and at least 6 per cent were relying on them to cover their daily expenses.
Five per cent were using credit cards to pay off previous debt - but reliance on credit cards can cause serious issues when repayments are missed.
Missing a payment on a credit card can lead to late fees and interest charges, as well as impacting one's credit score.
Most credit cards only give a 14-day grace period before recording on your credit file that a repayment is late.
Credit card dos and don'ts
For those struggling with credit card debt and repayments, here are some simple steps you can follow to help manage your finances.
Make minimum payments
It may sound obvious, but many people simply forget to make their minimum payments on credit cards, according to professor of finance at the University of Sydney Business School Susan Thorp.
An easy way to help mitigate this is to set up automatic repayments with your online banking, she said.
Some banks also offer text message alerts, which may be the gentle reminder needed to make sure you keep on top of things.
Talk to your lender
If you're facing financial hardship, it's in your best interest to be proactive and speak to your lender, according to associate professor of finance at the University of Sydney Andrew Grant.
"Call your lender ... and they might help you arrange a payment plan, which could help you get on top of your credit card repayment," he told SBS News. "The worst thing that you can do is default on the credit card because that will tank your credit score for a long period of time."
Don't ignore signs of trouble
Grant said if Australians are going to "extend themselves" then they need to have a comprehensive plan to get out of debt.
That includes not ignoring the warning signs that you're going too far.
"[If] you're having less money left over in your pay pack after paying off your interest payments on your debt, and you're struggling to get by without taking further debt to really make ends meet ... that's certainly a difficult place to be in," he said.
Trim expenses where you can
It's critical to understand "where your money is going", according to financial planning and tax lecturer at RMIT University Ama Samarasinghe.
"If your expenses are more than your income, it's time to cut back," she told SBS News. That doesn't mean going to extremes, but instead identifying and eliminating unnecessary or unused services.
"Trim down on those and use the saved money to settle the outstanding debt."
Explore your options
Samarasinghe said one option for Australians struggling with existing credit card debt is a balance transfer, which is when the balance on an old credit card is transferred to a new one, often with a zero per cent or lower interest rate on the transfer balance.
However, Samarasinghe warned that this low interest rate usually only lasts six months to two years, after which the interest rate goes up "significantly", often higher than the original rate on the first credit card.
"People need to consider this option only if they're confident that they can clear the transfer balance within that specific period," she said.
Grant said another option would be to apply for a debt consolidation loan, which "typically have a lower interest rate than your credit card repayment and may give you a longer time to pay it off".
Pay off the highest interest rate first
If you have multiple credit cards and multiple debts, the focus should be on paying off the debt with the highest interest rate first — not the highest balance — and making minimum payments on the others.
"If you pay off the card with the highest interest rate, you can strategically slow down the overall cost of the debt," Samarasinghe said.
Once that card is settled she suggests taking the money along with the minimum payments you were making on the other cards and directing that towards the next card with the next highest interest rate.
Get help
While some people might struggle with shame when it comes to being in debt, the worst thing to do is "ignore it", Grant said.
"If you show that you're aware that you're behind on your repayments and you plan on doing something about it — if you are upfront about it — you can usually get a good payment arrangement from your bank or financial institution," he said.
Samarasinghe pointed out that Australia has a that is staffed by qualified financial counsellors, as well as counsellors who are part of community service agencies, legal centres and health centres across the country.
"They are qualified and can give advice on most financial matters, considering the different circumstances," she said.
National Debt Helpline 1800 007 007
The National Debt Helpline is available 9:30 am to 4:30 pm weekdays. Live chat is available 9:00 am to 8.00 pm weekdays.
