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Yo-yo debting: Credit card holders staying in debt

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 October 23rd, 2018
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Product Description Monthly Repayment
RateSetter 3-Years Personal Loan
From 8.69% (fixed)
11.24%
$2,001
0.5 to 5 years
$0
$220
You'll receive a fixed rate from 8.69% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 6 months. Interest and comparison rates calculated for a loan term of 3 years.
Citi Personal Loan Plus
From 8.99% (variable)
9.96%
$5,000
3 to 5 years
$10
$199
You'll receive a variable rate between 8.99% p.a. and 17.99% p.a. (9.96% p.a. to 18.91% p.a. comparison rate) based on your risk profile
A credit limit up to $75,000 that you can continue to draw down over terms up to 5 years.
Harmoney Unsecured Personal Loan
From 6.99% (fixed)
7.69%
$5,000
3 to 5 years
$0
$500 (Upfront fee)
You'll receive a fixed rate between 6.99% p.a. and 26.95% p.a. based on your risk profile.
Apply for a loan up to $70,000 and repay your loan over 3 or 5 years terms.
ANZ Fixed Rate Personal Loan
12.45% (fixed)
13.32%
$5,000
1 to 7 years
$10
$150
You'll receive a fixed rate of 12.45% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
9.51%
$5,000
2 to 5 years
$0
3% (of loan amount)
You'll receive a fixed rate between 7.5% p.a. and 19.99% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
HSBC Personal Loan
From 9.5% (fixed)
10.06%
$5,000
1 to 5 years
$5
$150
You'll receive a fixed rate between 9.5% p.a. and 15.99% p.a. based on your risk profile
An unsecured personal loan with a tailored, fixed rate where you can make additional and early repayments without penalty.
Latitude Personal Loan (Unsecured)
From 13.99% (fixed)
15.19%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
You'll receive a fixed rate between 13.99% p.a. and 29.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Flexible repayments options.
ANZ Variable Rate Personal Loan
15.99% (variable)
16.84%
$5,000
1 to 7 years
$10
$150
You'll receive a variable rate of 15.99% p.a.
A flexible loan with amounts starting $5,000 that offers flexible repayments and a redraw facility.
Westpac Unsecured Personal Loan
12.99% (fixed)
14.14%
$4,000
1 to 7 years
$12
$250
You'll receive a fixed rate of 12.99% p.a.
Benefit from the security of a fixed rate with the flexibility of additional repayments. Existing Westpac customers may qualify for discounts.
Latitude Low Rate Personal Loan (Unsecured)
10.99% (fixed)
12.21%
$20,000
2 to 7 years
$13
$250
You'll receive a fixed rate of 10.99% p.a.
A secured or unsecured loan available to homeowners with a large minimum borrowing amount of $20,000. Benefit from flexible repayments and fast approval.
NOW FINANCE Personal Loans
From 8.95% (fixed)
10.56%
$5,000
1.5 to 7 years
$13
$495 (Based on $10,000)
You'll receive a fixed rate between 8.95% p.a. and 16.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan manager. No security required. Note: Get your loan approved and settled before 31 October 2018 and receive a $200 Coles gift card.
St.George Unsecured Personal Loan - Fixed Rate
From 12.99% (fixed)
14.06%
$2,000
1 to 5 years
$12
$195
You'll receive a fixed rate between 12.99% p.a. and 19.99% p.a. based on your risk profile
A low minimum borrowing amount of $2,000 to fund a range of purposes.

Compare up to 4 providers

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