Aussies wiped over $7 billion off their credit card debt

The Reserve Bank has released its March 2021 credit and charge card data, revealing Australians knocked $7.5 million off debt accruing interest on personal credit cards in March.

The debt decrease comes off the back of an $18.4 million increase the month prior.

Despite cardholders wiping $6.96 billion off personal credit card debt accruing interest over the last year, Australian credit card holders still have a personal credit card debt of $20.02 billion.

Despite the decline in debt, the value of purchases on personal credit cards totaled a staggering $21.90 billion, an increase of $1.09 billion from the month prior.

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

 “After a record year in cutting credit card debt, Australians cardholders have bounced back from a misstep in February to get back on the bandwagon in March, knocking off further debt.”

“Though the increase in debt accruing interest in February and March’s modest decrease looks insignificant in contrast to last year’s reductions, it shows how difficult the community may find it to consistently reduce dependence on credit card debt in what will hopefully be a more normal future.

“The extra billion dollars of spending on credit cards in March hopefully won’t translate to an increase in debt the following month.

“Lockdowns and economic impacts are an environment we never want to see reoccur, but the ability to curb spending and pay down debts are habits we hope are reproduced. The challenge we face is to entrench the best of our behaviour of this era and take a longer term view of our finances and spending intentions.

“The residual $20 billion in credit card debt is paying interest of around $283.4 million to the banks at the average interest rate of 16.99%. Supporting bank profits this generously is no way for Australians to get ahead.

“If you have debt on a credit card it's time to move it to a low rate card, of 12% or less, and an even better time to use a zero interest balance transfer period to systematically knock the debt off.

“A new challenge we will see playing out in next month’s April data is the end of JobKeeper, with accompanying job losses and increased reliance on credit card debt. Hopefully our economic bounceback will assure that this is short lived.”

RateCity.com.au research director, Sally Tindall, said over the last six months balances accruing interest had hung around the $20 billion mark.

“Australians have put in a mammoth effort to wipe almost $7 billion of credit card debt in just one year, but the battle is only half won with $20 billion still accruing interest,” she said.

“A lot of what’s left is stubborn debt that’s hard to get rid of, particularly now most of the COVID relief is over.

“Let’s not just pat ourselves on the back and accept that $20 billion is the new norm.

“If you’ve still got credit card debt hanging around, don’t give up until you’ve wiped the slate clean.

“Consider switching to a lower rate card, find money in your budget to pay it off and then cut up the card for good,” she said.

Summary of Reserve Bank Credit Card stats for March 2021:

• Australians wiped $7.5 million from personal credit card debt incurring interest in March with the total balances accruing interest now sitting at $20.02 billion. At the same time businesses saw a $2.9 million increase in credit card debt accruing interest with the total now $826.8 million.

• Personal credit card debt accruing interest has come down by $6.96 billion year-on-year, while businesses have reduced credit card debt accruing interest by $441 million.

• The number of purchases on personal credit cards increased by 6 million month-on-month, to 253.6 million in March. The value of purchases on personal credit cards increased by $1.09 billion from the month prior and $1.57 billion from the year prior, to reach $21.90 billion in March.

• The value of personal credit card cash advances is up month on month by $793,442, sitting at $399.3 million for personal credit cards in March. The number of cash advances fell by 18,196 to 1.14 million.

• There were 42,911 fewer personal credit card accounts in March than the month prior and 997,274 less than in March 2020. For businesses, the number of credit card accounts dropped by 14,524 from the month prior and 53,341 since March 2020.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.