Aussie travellers hit with $7.5 billion credit card debt
More than two-fifths of Australians return from their summer holidays with credit card debt.
With the summer holidays coming to a close, most Australian credit card holders will be returning from their trips with more than a tan and some bad souvenirs.
According to the 2016 Australian Debt Lag Survey conducted by finder.com.au, 41% of Aussie travellers arrive home from holiday with an average credit card debt of $2,075. That's a combined post-holiday credit card debt of $7.5 billion.
On top of this, 44% of Aussies who returned with credit card debt were unable to repay their debt within a month of returning home. Of course, this means that the post-holiday debt grows with interest. While most Australians are able to clear their debts in less than six months, 10% are taking at least 12 months to repay their holiday balances. So, it’s not surprising that Australians coughed up $180 million in interest in 2016. This figure skyrocketed 77% from the $140 million worth of interest accrued in 2015.
If you’re struggling to repay your post-holiday debt, there are a few strategies you can employ to get your finances in control. If you’re having trouble repaying your credit card because of high-interest rates, you could use a 0% balance transfer credit card. These cards allow you to move your existing debt to a new card with a 0% interest rate on balance transfers, allowing you to repay it without collecting additional interest. Following the Christmas and holiday period, a number of card issuers are offering 0% balance transfer deals for 12 to 24 months. This means you could repay your debt for at least a year without collecting any interest, allowing you to clear your debt faster while keeping costs to a minimum.
Make sure you know exactly how much you’ll need to pay each statement period to clear the entire debt before the promotion ends, though. This is because a higher revert rate will apply at the end of the introductory period and any remaining debts will start to collect interest again.
Of course, there are also some strategies you can put in place to avoid clocking up holiday debt before you even step out your front door. As well as interest costs, almost 80% of Australians were likely to collect holiday debt on their credit cards as a result of unplanned shopping sprees (35%), splurges on luxury accommodation (24%) and bills at fancy restaurants (20%). If you have a tendency to overspend, apply for a credit card with a lower limit on the card and spend with a budget in mind. This could help kerb your temptation to spend but will come in handy should you run into an emergency while on holiday.
Another way you can cut down your card costs on holiday is by using a card with no foreign transaction fees. This means that you won’t pay any additional charges when using your card to make purchases in a foreign currency while overseas. If you know you struggle to repay your debts in full, you can also opt for a credit card that has a promotional 0% interest rate on purchases. Similar to a balance transfer card, you’ll be able to pay off your debts without collecting any interest for 6 to 18 months depending on the card.
Whether you have a holiday coming up or are recovering from the debt lag of your last trip, there are plenty of ways you can get your debt under control. Plus, with the summer holidays coming to an end and back to school season upon us, there’s no better time to get your finances in order.