Credit card holders spent record $70 billion over summerTotal $50.2 billion in credit card debt – highest level in almost 2 yearsHow to beat the summertime blues by paying off bad debts!
How to beat the summertime blues
Credit card holders are being urged to beat the summertime blues and pay off their bad debts, following a record summer spend of over $70 billion according to new findings by Australia's biggest credit card comparison site creditcardfinder.com.au 1.
The latest credit card data released by the Reserve Bank of Australia (April 14, 2014) shows total purchases with plastic over summer (December 2013 to February 2014) hit a record $70.1 billion.
Total credit card debt reached about $50.2 billion in February – the highest level in almost two years.
Michelle Hutchison, Money Expert at creditcardfinder.com.au, said many cardholders will be heading towards winter with a depressing debt.
“Summer was a big season of spending; in fact it was the most we’ve ever spent on our credit cards in one season! It can be very depressing to be hitting the colder months while still having a summer debt hanging over your shoulders.
“Lingering credit card debt is a bad debt because they have much higher interest rates than other debts like home loans and can take forever to pay off if you’re not careful. It can weaken your financial position as interest builds up if you don’t pay it off.
“Credit card holders should pay off their bad debts first before it ends up costing you thousands of dollars in unnecessary interest."
According to the Reserve Bank figures analysed by creditcardfinder.com.au, the average credit card balance per card is $3,206, with $2,247 accruing interest. If cardholders paid the minimum repayments on a debt of $2,247 (without making any further purchases) at the average credit card rate of 17 percent, this could cost $5,886 in interest and take over 18 years to pay off.
“Credit card holders don’t have to pay interest on their credit cards. There are 39 credit cards including major banks in the creditcardfinder.com.au database with a balance transfer rate of 0 percent for up to 24 months, which means you can transfer your debt and pay no interest for up to two years.
“If you paid off a debt of $2,247 over 12 months by making monthly repayments of $187.25 each month, you could potentially save almost $200 in interest charges and be debt free in a year.
“Make sure you compare deals online, check for annual fees and other conditions before signing up,” said Mrs Hutchison.
creditcardfinder.com.au’s top ways to pay down your bad debts fast:
- Don’t miss your payments: Missing your payment deadline incurs a late fee which can range from $0-$40. It may seem small, but missing it or not paying it off in full will also cancel the interest-free period on your card, which can result in a hefty fee on your balance as well as interest will be charged immediately on all new purchases.
- Do a balance transfer: with 39 cards offering no interest for up to 24 months, it’s a great way to rid your debt without adding to interest on top. Focus on paying down your debt during the interest-free balance transfer period and don’t spend on the card as it will make it harder to reduce the debt.
- Cut your savings: If you have spare cash think about using it to pay off your credit card first. Even if you stop adding as much money to your savings, keep your good debt repayments such as a home loan to the bare minimum or stop adding to your savings account altogether. Not only will you cut down the time to pay it off but you will be debt-free sooner.
1. Based on Experian Hitwise, 2014
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The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is Australia's most visited comparison website and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares over 250 credit and debit cards from 31 brands, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au to find better (Source: Google Analytics).