How much credit card debt does the average person have?

Sally McMullen 14 March 2016

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Exactly how much credit card debt are we in and what can we do about it?

According to Reserve Bank of Australia (RBA) data, there are currently 16.3 million credit card accounts open in Australia. Given this is an equivalent of 90% of the adult population, it’s safe to say that more people are paying on plastic than ever before.

The total balances on credit cards rose to $52 billion last December, with the average person carrying $3,192 in debt, $1,971 of which is collecting interest. If more than half of the average balance is collecting interest, it’s no wonder why Australians have racked up $18 billion more credit card debt than they did a decade ago. While Aussies were carrying $24 billion worth of debt in December 2005, this shot up to $32 billion by Christmas in 2015.

Credit limits have also increased over the last decade, climbing 61% from $92 billion to $148 billion between December 2005 and 2015. This increase in credit limits has outstripped the rises in cost of living, so why are we struggling to repay our debts?

Most common reasons why people are in credit card debt

If you’re one of the many Australians having trouble managing your credit card debt, here are some of the mistakes you should avoid to take control of your finances.

  • Accepting a high credit limit. You might be eligible for a high credit limit, but this doesn’t mean you should accept it. High credit limits could tempt you to spend more than you can afford to repay, so you should avoid accepting a credit limit larger than what you need.
  • Only paying the minimum repayment. Even if your card has 0% on purchases, you’ll be required to make minimum repayments each month. However, only meeting the minimum repayment rarely helps take a chunk out of your debt. If you want to pay off your debt fast (especially if there’s a 0% purchase or balance transfer offer in place), consider how much debt you have and calculate how much you’d have to pay each month to have your balance completely repaid by your goal date. While you’ll be paying more upfront, this will mean you’re free of debt sooner and will likely save you more in interest in the long run.
  • Making unnecessary purchases. Having a credit card can give you a false sense of financial security, so it’s important to remember that you have to repay everything you charge. If you struggle to control your spending, leave your credit card at home and only bring it out when you have a specific and necessary purchase in mind. Go over your credit card statement each month to keep track of exactly how much you owe, which might also kerb overspending the next month.
  • Staying with the same credit card. If you’re trapped with debt that’s continuing to grow with interest, you might need to consider conducting a balance transfer. Transferring your debt to a card with 0% on balance transfers for a promotional period will mean that, while you’ll still have to make repayments, you can repay your debt without the pressure of additional interest.

A credit card can be a great way to manage your finances, so long as you repay your balance in full each month. Whether you’re currently in the market for a credit card or already have one, the mistakes above are almost as easy to make as they are to avoid, so taking the time to acknowledge them is your first step to a healthy credit card.

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