Credit card debt slashed by $8 billion this year

The Reserve Bank has just released its latest credit and charge card data, revealing Australians have knocked $7.68 billion off personal credit card debt accruing interest this year. Credit Card

Over the same period, businesses have cut $401.7 million from credit card debt accruing interest.

This brings the total reduction in credit card debt accruing interest for personal and business to $8.08 billion since January.

The latest data shows personal credit card debt accruing interest has been declining for 9 consecutive months, while business credit card debt accruing interest has been falling for 8 consecutive months.Number Of Credit Cards Credit Card Debt

But money management is important at this time of year

The headway made to pay down credit card debt could be undone if card holders reach for the credit card this Christmas, said Canstar’s finance expert, Steve Mickenbecker.

“As tempting as it might be to splash out to make Christmas feel extra special this year, don’t come unstuck before the years’ end by stacking on credit card debt,”

“This year has been a breakthrough for many credit card holders with credit card debt declining rapidly. A new frugality has taken hold and if carried into the new year, we could see a sustained decline in credit card debt.

“The pandemic has taught us a lot about our attitudes and values, and one of the learnings has been that the sustainability of our lifestyle matters more than the number of things money can buy. Hopefully this financial habit will endure well beyond COVID-19.

“While further cuts to credit card debt look promising, it will be important to ensure credit card debt isn’t transferred to other forms of debt such as buy now, pay later services.
The latest Canstar Consumer Pulse Report found the number of people with debt in a buy now, pay later service has increased to 18% this year, up from 10% in 2019.

“October’s credit card debt accruing interest is down month on month but at a slower rate, which shouldn’t be a surprise given the tailing off of early release of superannuation.”

It’s good to see debt accruing interest dropping

RateCity.com.au research director, Sally Tindall, said it was great to see the total debt accruing interest drop below $20 billion. credit card

“It’s taken us 16 years to get here, and let’s hope we can keep the debt accruing interest under $20 billion on the other side of Christmas,” she said.

“While Australians are still chipping away at their outstanding credit card debt, the rate at which we’re knocking it off has slowed.

“Next month the number of transactions is likely to spike as a result of pre-Christmas sales, such as Click Frenzy and Black Friday.

“The real test will be whether the debt accruing interest spikes too or whether Australians have learnt their lesson about the perils of racking up high interest credit card debt.

“If you’ve given your credit card a workout in the lead up to Christmas, try and work out a plan to pay your debt off before your interest free days expire.

“The last thing you want is to start 2021 with a mountain of debt at rates as high as 24.99 per cent,” she said.

Credit Cards Covid

 

Tips for using your credit card this Christmas 

  1. Set a budget: Make a list and don’t overspend.
  2. Take away the temptation: Put your credit into the freezer once you’ve reached your budget limit.
  3. Make a plan to pay it back: Before you spend, make sure you have enough money to pay it back in January, so you’re not lumped with interest charges.

 

Credit card statistics: change since COVID

March October Change since COVID
Number of credit card accounts 13,641,553 12,909,231 732,322
Lowest since Nov 2007 -5.37%
Balances accruing interest $26.98 billion $19.71 billion -$7.27 billion
Lowest since Oct 2004 -26.94%

Source: RBA, released 7 December 2020, original data, excludes commercial cards.

Credit Card Statistics – Personal Cards

Jan-2020

Sep-2020

Oct-2020

$ Difference

% Change

MoM

From Jan

MoM

From Jan

Number of Accounts*

13.8 billion

13.0 billion

12.9 billion

-78,120

-869,247

-0.60%

-6.31%

Balances Accruing Interest*

$27.39 billion

$20.08 billion

$19.71 billion

-$362.5 million

-$7.68 billion

-1.81%

-28.03%

Average Balance Accruing Interest*^

$4,970

$3,865

$3,818

-$47

-$1,152

-1.21%

-23.18%

Number of Transactions

238.1 million

227.6 million

234.5 million

6.8 million

-3.7 million

3.00%

-1.54%

Value of Transactions

$22.74 billion

$19.86 billion

$20.41 billion

$545.7 million

-$2.33 million

2.75%

-10.27%

Number of cash advances

1,376,325

1,117,799

1,109,535

-8,264

-266,789

-0.74%

-19.38%

Value of cash advances

$483.5 million

$392.9 million

$385.6 million

-$7.3 million

-$98.0 million

-1.86%

-20.26%

Prepared by www.canstar.com.au. Data source: RBA Credit and Charge Card Statistics, Oct-2020. *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).

Credit Card Statistics – Business Cards

Jan-2020

Sep-2020

Oct-2020

$ Difference

% Change

MoM

From Jan

MoM

From Jan

Number of Accounts*

860,918

812,513

811,676

-837

-49,242

-0.10%

-5.72%

Balances Accruing Interest*

$1.28 billion

$909.1 million

$874.9 million

-$34.2 million

-$401.7 million

-3.77%

-31.47%

Number of Transactions

17.0 million

11.5 million

11.7 million

268,195

-5.3 million

2.34%

-31.16%

Value of Transactions

$6.08 billion

$4.68 billion

$4.65 billion

-$25.9 million

-$1.42 billion

-0.55%

-23.40%

Number of cash advances

65,981

30,069

30,272

202

-35,709

0.67%

-54.12%

Value of cash advances

$54.3 million

$33.3 million

$31.3 million

-$2.0 million

-$23.0 million

-5.95%

-42.30%

Prepared by www.canstar.com.au. Data source: RBA Credit and Charge Card Statistics, Oct-2020. *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.

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Rita Thomas

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.
Visit www.MelbourneBuyersAgent.com.au


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