Surprising upside to lockdowns – Aussies pay off $1 billion in credit card debt

By:

Coinciding with the first full month of NSW in lockdown, Australians have managed to pay off over $1 billion in personal credit card debt according to the latest Reserve Bank of Australia credit and charge card data. Multiple Credit Cards

It seems that as households settled into lockdowns in New South Wales and Victoria during July, they locked away their credit cards and began paying down their debts.

That saw credit card spending plummet 11.4 per cent to $19.5 billion in July.

The value of purchases dropped by 9.29% or $2 billion in July with the total value of purchases sitting under $20 billion for the first time in 9 months, while the number of purchases also dropped by 15 million from the month prior.

The lockdowns obviously offer limited opportunities to spend on credit cards and have prompted many people to prioritise paying down debts amid growing economic uncertainty.

Their ability to repay debt and curb spending may be short-lived in the coming months.

New Canstar data in September shows 42% of Australians are delaying certain financial decisions as a result of COVID-19 lockdowns in 2021.

Of this group, some admitted to delaying paying bills on time (32%), proceeding with medical procedures (22%), and renewing insurances (17%).

Canstar’s Group Executive, Financial Services, Steve Mickenbecker says that:

“Over the last twelve months, Australians have hardly made a dent in their credit card debt and it has taken another extensive lockdown to get card holders back on track.

Lower spending has at this stage dragged credit card debt down. Hopefully this will be sustained, but the deeper we get into lockdown the tougher that will become.

This time around we don’t have superannuation early release nor the broad reach of Jobkeeper to help out.

Curbs to spending and debt reduction may be short lived. Australia Post reported this month being inundated with parcel deliveries, as people embraced online shopping as a release valve during lockdown, and they may feel less inhibited about spending than in 2020 with the path to recovery clearer this time around.

Canstar’s most recent September survey also shows that some people are deferring paying bills, renewing insurances and undergoing medical procedures, suggesting that the risk to higher debt doesn’t all come from an online shopping spree, but also from everyday living.

With $18.90 billion in credit card debt still accruing interest, it’s hard to see households extensively repaying debt until there are wage increases.”

Summary of Reserve Bank Personal Credit Card stats for July 2021:

  • Australians cut $1.11 billion or 5.53% in personal credit card debt accruing interest in July with the total balances accruing interest now sitting at $18.90 billion. Rba

  • The number of purchases on personal credit cards dropped by 6.17% or 15.1 million months on a month to reach 229.7 million purchases in July.

  • The value of purchases on personal credit cards dropped by $2.00 billion or -9.29% from the month prior to reach $19.53 billion in July.

  • There were 44,116 fewer personal credit card accounts in July than the month prior and 670,419 less than in July 2020.

  • The value of personal credit card cash advances was down by 9.28% by 9.28% on the month prior or $35.1 million, sitting at $342.8 million for personal credit cards in July. The number of cash advances also fell by 8.44% to reach 954,517.

Credit Card Statistics – Personal Cards

Jul-2020

Jun-2021

Jul-2021

$ Difference

% Change

MoM

YoY

MoM

YoY

Number of Accounts*

13.1 million

12.5 million

12.5 million

-44,116

-670,419

-0.35%

-5.10%

Balances Accruing Interest*

$21.47 billion

$20.01 billion

$18.90 billion

-$1.11 billion

-$2.57 billion

-5.53%

-11.96%

Average Balance Accruing Interest*^

$4,084

$3,997

$3,789

-$208

-$295

-5.19%

-7.23%

Number of Purchases

228.8 million

244.8 million

229.7 million

-15.1 million

881,061

-6.17%

0.38%

Value of Purchases

$19.08 billion

$21.53 billion

$19.53 billion

-$2.00 billion

$449.9 million

-9.29%

2.36%

Number of Cash Advances

1,085,201

1,042,463

954,517

-87,946

-130,683

-8.44%

-12.04%

Value of Cash Advances

$395.9 million

$377.9 million

$342.8 million

-$35.1 million

-$53.1 million

-9.28%

-13.42%

Prepared by www.canstar.com.au. Data source: RBA Credit and Charge Card Statistics, July-2021. *Number of credit card accounts and balances accruing interest based on original terms. Statements about trends should be made with caution. All other values are in seasonally adjusted terms. ^Assumes 40% of personal credit card accounts are revolving a balance, and therefore accruing interest, based on the Canstar 2020 Customer Satisfaction Survey (n=5787).

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


About

is a Property Strategist with an accounting background and over 30 years’ Commercial Banking experience. She is a passionate property investor who enjoys helping her clients create wealth through property investment using Metropole’s strategic approach.
Welcome to Metropole Melbourne


'Surprising upside to lockdowns – Aussies pay off $1 billion in credit card debt' have 4 comments

    Avatar for Rita Thomas

    September 9, 2021 V

    Ha-ha, Michael. Freedom of speech does not exist on your website.

    Reply

    Avatar for Rita Thomas

    September 9, 2021 V

    This is good for ordinary people who got rid of over $1 billion hanging over their heads and stopped paying huge 20% interest to financial institutions. Respectively, those big banks lost $200 million of monthly interest, the big companies sold less items that were putting people into deep debt, and the Government lost taxes on all of the above. This is what they call the economy transferring wealth from the pockets of “small” into pockets of “big” people. Now think in whose interest is to quit lockdowns as soon as possible, regardless of catastrophic health impact, based on skewed scientific analysis and false vaccination goals.

    Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts