Australians don’t appear to be feeling the heat of the interest rate rises yet, with credit card spending hitting a record high and debt dropping to almost a two-decade low.
In fact, debt accruing interest fell to $16.94 billion in August, in original terms according to the latest RBA data released today.
This is actually the first time the country’s credit card bill has been below $17 billion since May 2003.
Australians owe $19.0 billion less than they did at the peak in February 2012 when a staggering $35.9 billion of credit card debt was accruing interest.
Also, the mass credit card exodus appears to be over, with the number of accounts only dropping by 0.3 per cent year-on-year.
Spending through the roof despite RBA interest rate hikes
The value of credit card transactions hit a record high of $26.59 billion in August, up $2.82 billion (11.9 per cent) when compared to the month before.
Debit card transactions also hit a record high of $46.76 billion in August, up 5.6 per cent from the month before.
Obviously, spending in August hit a new record high, with a total of $73.35 billion of credit and debit card transactions, despite the RBA interest rate hikes.
Ms Sally Tindall, Research Director at RateCity.com.au said
"Australians should be congratulated for getting the total credit card debt below $17 billion.”
She further commented:
“While $16.94 billion is a huge amount to be paying a high-interest rate on, it’s still encouraging to see credit card debt fell to its lowest level in almost 20 years.
With tough times ahead, it’s great to see people clearing their debt where they can. Healthy tax returns are likely to have given some families the opportunity to get on top of their credit cards.
Spending across both credit and debit cards increased in August, seemingly impervious to the RBA hikes, with both hitting record highs.
With about 35 per cent of mortgages on a fixed rate and a two-to-three-month lag for people on a variable rate, these RBA hikes are taking a while to filter through.
Additionally, some borrowers may not be paying significantly more yet, if at all, because they were already making higher repayments before the hikes began.
Of course, totals and averages never tell the whole story. A lot of families are already doing it tough.
While it can be tempting to plug a gap in your finances with a credit card, know that this is likely to make the matter worse. Look for other ways to meet the rising cost of living including overhauling your regular bills."
