Married to debt

Yo-yo debting: Credit cardholders staying in debt

Rates and Fees verified correct on February 20th, 2017

Don’t say "I do" to debt.

While debt isn't something that should always be avoided, it also isn't something that you want with you forever. Unfortunately, debt can follow you around, affecting your savings, choices and your ability to access credit. According to an analysis conducted by finder.com.au, Aussies seem to be saying "I do" to their credit cards and hitching themselves to debt 'til death do they part.

Figures from the Reserve Bank for August 2013 show that while the total national debt fell slightly by $280 million from July, it has remained at about $50 billion on average for the past two years. However, credit cardholders are repaying about 45% of the average debt and many are likely to be adding just as much to their card each month. This spending habit has been coined "yo-yo debting".

What is the effect of "yo-yo debting"?

When you engage in yo-yo debting habits there isn't only an effect on your own finances, but it also affects the national debt level and Australia’s financial position. National credit card debt has grown by about 1%, or $311 million, over the last two years. Of that amount, the average credit card debt is $3,277 which is likely to stick with yo-yo debtors for their entire life.

If you’re a yo-yo debtor, the pressure is on to think critically about your repayment habits. It costs about $46 each month or over $5574 a year in interest charges to maintain yo-yo debting habits on an average credit card balance. To break the pay-repay cycle, you need to focus more on repaying existing balances, not just maintaining the same level.

That can be easier said than done. Even if the average cardholder were to pay down the minimum each month and not make any further purchases on their card, it would still take over 42 years to pay off this $3,277 debt – and that doesn’t include any annual fees.

How to break the debt cycle

For those guilty of yo-yo debting, a balance transfer of 0% p.a. for 12 months could give you plenty of time to pay off your debt interest-free. For instance, with the average debt of $3,277 it would cost about $273 in monthly repayments to see the debt paid off in a year without interest being charged.

Luckily for cardholders, credit card providers are at war when it comes to balance transfer deals, which means there’s no shortage of offers. There are several cards out there with 0% purchase rate offers, 0% p.a. balance transfer offers and no annual fees. Compare some these options to break out of the yo-yo debt cycle.

Have you considered a personal loan to pay off credit card debt?

Rates last updated February 20th, 2017
$
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
HSBC Personal Loan
A competitive fixed interest rate loan with the option to make extra repayments. Min. income $30,000
From 9.5% (fixed) 10.06% $5,000 1 to 5 years $150 Go to site More
NAB Personal Loan Unsecured Variable Rate
An unsecured loan with a redraw facility that allows you to access money you've paid in advance.
From 14.69% (variable) 15.55% $5,000 1 to 7 years $150 Go to site More
Latitude Personal Loans (Unsecured)
An unsecured loan designed for multiple purposes – renovating, buying a car or travelling. Funds can be in your count in as little as 24 hours.
From 13.99% (fixed) 15.2% $3,000 2 to 7 years $250 (Loans under $4000 - $140) Go to site More
CUA Discount Fixed Personal Loan (Loans over $30,000)
Take advantage of a competitive fixed rate and no monthly fees when you borrow over $30,000
From 10.99% (fixed) 10.99% $30,000 1 to 7 years $0 Go to site More
Citi Personal Loan Plus
Borrow up to $75,000 with this personal loan offer from Citi.
From 11.99% (variable) 12.77% $5,000 3 to 5 years $199 Go to site More
ANZ Fixed Rate Personal Loan
A flexible loan option that lets you pay off your debt, buy a car, fix up your house or cover travel costs.
From 13.95% (fixed) 14.81% $5,000 1 to 7 years $150 Go to site More
NAB Personal Loan Unsecured Fixed
An unsecured loan available for a wide range of purposes for a long period of time up to 7 years.
From 14.99% (fixed) 15.85% $5,000 1 to 7 years $150 Go to site More
MoneyPlace P2P Loan
Interest rates from 8.90% p.a to 17.25% p.a. Comp rates from 8.90% p.a to 19.01% p.a depending on your credit score.
From 8.9% (fixed) 8.9% $5,000 3 to 5 years 0% - 3.75% of loan amount Go to site More
St.George Get Set Loan Personal Loan
A revolving line of credit that lets you access your funds as and when you need to.
From 17% (variable) $5,000 $150 Go to site More
St.George Unsecured Personal Loan - Variable Rate
The Variable Rate Unsecured Personal Loan St.George lets you borrow up to $40,000 for a period of up to 7 years.
From 12.99% (variable) 13.87% $3,000 1 to 7 years $195 ($0 for existing customers) Go to site More
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