Apparently only half of Australians who find themselves buried under out of control credit card debt would be able to dig themselves out.
A recent Finder survey of 825 credit card holders revealed where Aussies would turn if they couldn’t make the minimum repayment on their card.
The research found that just half (51%) of cardholders could dip into their emergency savings to tackle the payment.
The remaining respondents would need to look elsewhere to meet their repayments with nearly one in five (18%) turning to a loved one, and a similar amount (19%) contacting their bank for assistance.
Kate Browne, personal finance expert at Finder, said missed repayments can cause finances to spiral out of control.
“Pre-coronavirus, paying off a manageable amount of credit card debt was straightforward.
“Now, it only takes a job loss or an unexpected expense to go from paying off debt comfortably to struggling to keep up with bills,” she said.
Australians hold almost $39 billion in credit card debt according to the Reserve Bank of Australia, and with unemployment at 6.8%, it’s possible that more people would be finding it hard to keep up with credit card repayments.
Worryingly, Finder’s research showed 6% of cardholders wouldn’t turn to any outside help and just miss the repayment, while 3% would use a small personal loan to afford the credit card repayments.
Men (8%) are twice as likely to completely miss the payment, compared to women where only 4% would resort to this.
Browne said it’s vital that Australians contact their credit card provider before their account goes into default
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“If you miss a credit card payment, this may be listed on your credit report and can hurt your credit score.
“You’ll have more options if the bank sees you are being proactive in trying to solve a debt problem ahead of time,” she said.
“If you have missed a payment, you can get a free copy of your credit report through Finder and see if it has had an impact on your credit score.”
|If you were unable to meet a repayment on your credit card where would you turn first? (credit card holders only)|
|I would call my bank/provider/issuer for help||19%|
|Ask family/friends for help||18%|
|I would miss the payment||6%|
|Take out a small personal loan to cover it||3%|
Source: Finder September 2020 survey of 825 credit card holders
Tips for paying off your credit card debt
- Find out what hardship policies are being offered through your current bank or provider – some banks are waiving fees for customers affected by COVID-19.
- Pay down balances on cards with the highest interest rate first.
- Buy yourself extra time – a 0% balance transfer card can help to simplify your finances and consolidate your debts.
- Making even the minimum payment can help you avoid fees and saves your credit score from taking a hit.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
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