COVID-19 credit crunch: Two million Australians over their credit card limit

• • • • 986,000 Australians still over their credit card limit
      • Women more likely than men to go over their limit
      • How to keep your credit card use under control

23 September 2020, Sydney, Australia – Coronavirus is leaving millions of Australians at risk of credit card delinquency, according to Finder, Australia's most visited comparison site.

A new Finder survey found 15% of credit card holders have gone over their limit during the pandemic – that's equivalent to two million Australians.

Of these people, 7% are still currently over their limit. The other 8% have paid down the debt below the credit limit since going into the red.

Kate Browne, personal finance expert at Finder said some Australians are entering a credit card danger zone.

"Almost one million borrowers are currently over their credit card limit and risk taking a hit to their credit score," she said.

"Some people who were already in debt are now struggling to make their repayments and, on top of that, are relying on credit cards to pay for essentials like rent and food, which is pushing them over their limit," she said.

According to Finder's analysis of Reserve Bank of Australia data, the average credit limit per borrower is $9,892 and there are just over 14 million credit cards in circulation.

The data shows that balances accruing interest actually dropped during the height of COVID-19 – from $1,877 in February to $1,647 in June.

While this is a good sign, the analysis also found that the repayments against these balances dropped – from 103% in February to 89% in May – meaning people have started paying off a smaller percentage of the total amount they owe.

Browne said if cardholders are struggling to make repayments, they should contact their bank immediately to discuss their options.

"Your lender may be able to organise a repayment plan to help you get your debt under control.

"You should also check if your credit score has been impacted, which you can do for free."

The research highlighted that more women (18%) went over the limit on their credit card during the pandemic than men (13%).

More than 1 in 4 millennials (26%) were overdrawn on their credit card at some point during the coronavirus pandemic, with more than 1 in 10 (11%) still unable to resolve the issue.

Browne urges Aussies to explore every option before deciding not to pay.

"Even missing one or two payments can become a slippery slope that can spiral out of control quickly."

How to keep your credit use under control

• Impose a hard limit on your credit card account. If you have a provider that allows you to spend over your credit limit and you're sick of incurring credit card over-limit fees, the simplest solution is to give your lender a call and let them know that you want to impose a "hard limit" on your credit card account.
• Set up online, mobile or telephone banking. If you have a smartphone, you can download your bank's app and monitor your balance at any time. If you have online, mobile or telephone banking set up, the card provider can send you a text notification when you're about to exceed your credit limit.
• Make more regular repayments. Even though credit card statements are only issued monthly, you can make weekly or fortnightly payments which could help you pay off debt faster and give you more breathing room.