Australians wipe $9.31 billion off credit card debt since COVID

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The Reserve Bank of Australia has today released new credit card statistics showing that Australians managed to pay off $645 million in personal credit card debt in September, while purchase values rose slightly. 

The national credit card debt accruing interest has fallen to the lowest level in almost 18 years, as Australians continue to clear their debt in the latest lockdown. Multiple Credit Cards

The Reserve Bank figures also show that while the number of purchases remained steady from the month prior at $219.7 million, the value of purchases increased by $28.2 million, suggesting that consumer confidence rose slightly in response to a projected end to lockdown restrictions across New South Wales and Victoria in October.

The data shows debt accruing interest on personal credit cards is down $9.31 billion from March 2020 to September 2021, to a total of just $17.68 billion – the lowest level since November 2003.

Analysis is based on personal credit card data and excludes commercial credit cards. 

Credit card statistics: personal credit cards in September – excludes commercial cards

 AmountMonthly changeYear-on-year changeSince COVID (Mar 2020)
Number of accounts12.4 million
Lowest since Dec 2006
-15,413
-0.1%
-577,811
-4.4%
-1.2 million
-9.0%
Balances accruing interest$17.68 billion
Lowest since Nov 2003
-$645.3 million
-3.5%
-$2.40 billion
-12.0%
-$9.31 billion
-34.5%
Total value of transactions$19.89 billion-$186.3 million
-0.9%
$18.7 million
0.1%
-$1.77 billion
-8.2%

Source: RBA, released 8 November 2021, original data, excludes commercial cards.

Monthly change is August – September 2021, year-on-year change is September 2020 to September 2021, since COVID change is March 2020 to September 2021.

Credit Cards

Source: RBA.

Experts’ commentary:

RateCity.com.au research director, Sally Tindall, said:

“Australians have paid down more than $9 billion in credit card debt since COVID hit, a drop of over one third.”

Lockdown living helped many families kick stubborn credit card debt as they channelled money saved from not going out towards improving their financial position,” she said.

The test will be whether Australians can enjoy a lockdown-free Christmas without falling back into bad credit card habits.

The number of accounts keeps on dropping as customers turn their backs on credit cards for good, with many switching to the buy now, pay later market for their credit fix.

A lot of people are operating under the assumption that buy now, pay later is a comparatively safe form of debt because it doesn’t attract interest.

These platforms might be interest-free, however, they often come with hefty late fees and can lead to overspending if people aren’t careful.

Whether you’re using a credit card or a buy now, pay later service, think carefully about how much debt you’re taking on and make sure you clear it before you get hit with any extra charges.”

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

“Lockdown is good for household balance sheets, with Australians wiping a further $645 million off personal credit card debt accruing interest in September. Total personal credit card debt accruing interest is now down by $9.5 billion from pre-COVID February 2020.” credit-card

The value of credit card purchase was up in September as Sydney and Melbourne residents developed confidence that the lockdown shackles were about to come off. The government will take some encouragement that a spending-led recovery into 2022 seems more than likely to happen.

Collectively, the country is hoping for an opening of wallets that will benefit the economy as the nation opens back up, but individually people might want to give weight to the hard work done to pay off their debts before surrendering to ‘freedom spending’.

Canstar research shows that 55 percent of Australians have experienced buyer’s remorse following a purchase, which indicates that there is a strong case for hitting the pause button before presenting the plastic or opting for buy now pay later.

An ongoing $18 billion of personal credit card debt nationally combined with the personal credit card interest rate averaging 16.97 percent and immunity from rate cuts elsewhere, means a very high national interest bill of around $3.05 billion in interest over a year.”

ALSO READ: Credit card woes: Where do Aussies turn if they can’t pay off their plastic?

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


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