1 in 3 Australians default on their credit card repayments
Australians are failing to pay their credit card bills, picking up debt and hurting their credit scores in the process.
In August 2016, we reported that Australians were paying off their credit card debts faster than they had in over four years. However, nearly one-third of Australians are still struggling to pay their credit card bills each month.
According to a survey conducted by finder.com.au, 32.4% of Australians have defaulted on their credit card repayments. The survey found that 17.5% of Aussies had missed one credit card repayment, while a further 14.9% had failed to pay more than once.
Each month, credit card holders are required to pay a minimum repayment of their balance before the end of the statement period. This minimum repayment is usually 2% of the 3% of the total balance and won’t stop you from being charged interest. So, if you had a balance of $1,000 and a minimum repayment of 2%, you’d be required to pay at least $2. This would bring your balance down to $980 and this remaining amount would attract the standard interest rate. However, if you’re unable to meet the minimum repayment, not only will you collect more interest (due to your balance being higher), you’ll be penalised with a late payment fee and it will be recorded as a negative mark on your credit file.
Each time you apply for a credit card or loan, the issuer will assess your credit file to determine whether you’re a low-risk applicant. If they see several missed credit card repayments on your file, they’ll consider you a high-risk applicant and may reject your application. As declined applications are also listed on your file, this could decrease your chances of approval in the future even further.
If you’re struggling to repay your credit card bills because you have multiple debts over more than one credit card, you might want to consider consolidating your balance in one account with a 0% balance transfer offer. Not only will you only have one credit card bill to repay, you’ll also be able to repay your account without the cost of interest for the length of the promotional period.
If you are struggling to meet your minimum credit card repayments each month, you can use our guide on how to calculate your credit card monthly repayment to determine how much you need to pay each month. Regardless of how you do it, making sure you meet your minimum credit card repayments each month will help you avoid those pesky late payment fees and keep your credit file in good shape.