Australians are addicted to overspending on credit cards
24 May 2017, Sophie Elsworth News Corp Australia Network
CREDIT card users admit the temptation to splash out on plastic is far too enticing and many do it just so they can rack up rewards points.
While the nation has amassed more than $52.5 billion on credit cards and more than $32.9 billion is accruing interest, cardholders concede they have spent more than they should have or been tempted to do so because it’s so easy to spend up.
The new data from debt solutions agency Fox Symes found 37 per cent of Australians have overspent or been tempted to overspend on credit cards.
And the reasons for this vary — from the lender offering to increase their limit allowing them to spend more (16 per cent), to the ease of getting a card (11 per cent).
Other cardholders said it’s way too easy to meet minimum monthly repayments (10 per cent) or they overspend just so they can collect more rewards points (10 per cent).
Minimum monthly repayments are usually around just two per cent of the card’s total outstanding balance.
Fox Symes’s executive director Deborah Southon said these results were “disturbing” as many consumers continued to get tangled up in debt.
“A lot of this has to do with us being a consumer-driven society where we just have to have what we want immediately and we do so on credit,’’ she said.
“It’s just so easy and tempting, especially for the younger generations ... they’ve not seen what high-interest rates are like, they’ve not seen what it’s like when it’s hard to get a job.
“That temptation to say yes to a credit card is there ... you can see the consequences of it because we have a large number of indebted people.”
Cardholders can at any time apply to increase their card limit but usually there are restrictions that only allow you to request one card limit increase every six months from your lender.
Credit card providers cannot send you unsolicited invitations to increase your credit limit without first getting your approval when you signed up to the card.
AMP financial planner Darren James warned consumers to only use credit cards alongside a “rigid budget.”
“It’s almost like giving yourself a payrise but with borrowed money, with a payrise people often spend it without knowing where the money is going and this is, unfortunately, the same sort of outcome,’’ he said.
“If you’re a disciplined person and have a budget in place a credit card can be used quite well with the basis that every month you can pay it off fully without paying interest charges.
“But for those who can’t manage that, if it’s likely to result in them paying more for something because they can’t repay their credit card then it would be better for them not to have a credit card.”
CREDIT CARD TIPS:
- Pay off your card balance in full every month to avoid interest charges.
- Keep your limit low so you can’t rack up high amounts of debt.
- Don’t accept invitations to increase your limit.
- Set up direct debits so you automatically pay off your card balance each month.
- If you can’t pay the card off in full each month look for a low-rate card.
This article first appeared on news.com.au