Australian’s who spent up big on their credit cards over the holiday season are about to receive a nasty shock!
RateCity analysis of RBA data shows Australians are estimated to have put a whopping $28.6 billion on their credit cards in December.
This equates to a spend of $3,679 per cardholder in just one month.
And now as their credit card bills begin to roll in over the next few weeks they’re going to get hit with a high interest rate bill — as high as 24.99%.
For those who only make minimum repayments on the average December debt of $3,679 it would take 24 years and 9 months to clear the debt and cost and extra $6840 in interest.
RateCity money editor Sally Tindall commented:
“Families are not only dealing with debt from the holidays, they’re now racking up more expenses on their cards to pay for essential back-to-school items.
“Most people have between 45 and 55 interest free days, but once they dry up, people get hit with interest rates as high as 24.99 per cent.
“If you are carrying a large amount of debt, transferring the balance to a card that offers an interest-free period can give you some breathing space.
Balance transfer card tips
RateCity suggests considering transferring your credit card balance to a new card with a long interest-free introductory period, a low balance transfer fee and an ongoing annual fee that’s ideally less than $100, if not $0.
However, this concept required financial discipline.
They suggest you:
- Pay off the debt before the introductory period ends.
- Beware of alarmingly high interest rates applied after the introductory period ends.
- Set up an automatic repayment plan that sees you chip away at the debt every month.
- Cut up the card as soon as you get it. A lot of people don’t realise that if you do a balance transfer, you automatically lose your interest-free days until you pay the debt off so any additional shopping will attract interest straight away.
Consider a personal loan
If financial self-control isn’t your strong suit, RateCity suggest it could be worth taking out a personal loan instead.
1. Average personal loan rates are generally lower than credit card interest rates.
2. Personal loans have strict repayment terms which can be beneficial for those who have trouble managing a credit card.