Houston, we have a problem: Australians struggling to clear credit card debt as cost of living pressures bite

Australia’s total credit card bill has climbed for the second month in a row to $17.77 billion as households reach for the plastic to make ends meet in the face of rising costs.

RBA statistics released today show the total debt from personal credit cards attracting interest rose by $3.5 million to $17.77 billion - the highest level since August 2021.

The RBA statistics show this is the seventh month out of the last eight that credit card debt has risen.

Interestingly, the number of credit card accounts continued its slow recovery, increasing by over 17,000 in the month of May, and almost 200,000 compared to a year ago.

Credit card statistics: personal credit cards in May 2023

Note: commercial cards are excluded.

Source: RBA, released 7 July 2023, original data, excludes commercial cards. Monthly change is April 2023 to May 2023, year-on-year change is May 2022 to May 2023.

Total value of transactions: credit and debit cards in May 2023

Source: RBA, released 7 July 2023, seasonally adjusted data, excludes commercial cards. Monthly change is Apr 2023 to May 2023, year-on-year change is May 2022 to May 2023.

RateCity.com.au research director, Sally Tindall, said: “The total credit card bill keeps on climbing as more and more families reach for the plastic to make ends meet.”

“The latest RBA statistics show total credit card debt attracting interest charges from households has risen for seven of the last eight monthss,” she said.

“It’s a concerning statistic that’s set to keep on rising as households increasingly feel the squeeze from the double whammy of inflation and the RBA hikes.”

“Credit cards are slowly coming back into fashion with the total number of accounts up almost 200,000 compared to a year ago. This is likely to be for a range of reasons, with some people in search of frequent flyer points, while others are looking to arm their wallet with a range of options.”

“Some may have closed their account in favour of buy now pay later products but are coming back to a less restrictive form of credit.

“Plugging a hole in your budget using your credit card can be a slippery slope. If you don’t have enough money to clear that debt in full the very next time your bill hits your inbox, the bank will slog you with interest.

“The average interest rate for those who have credit card debt is a concerning 17.71 per cent, but on certain cards, the rate can climb as high as 25.8 per cent.

“If you’ve got a hole in your budget, keep the credit card locked in the bottom drawer and find an alternative way to repair it.

“Applying for hardship with your bank or energy provider can be one way to buy yourself some much-needed time to get your finances in order.

“It’s also well worth calling the National Debt Helpline which can put you in touch with a personal financial counsellor for free on 1800 007 007,” she said.

Solutions for managing credit card debt

1. Call your bank and ask to be put on their hardship program. The bank will work with you to find a solution.
2. Tell your other providers you are in financial hardship. Many providers will see if you can switch to a cheaper plan or put you on a payment plan.
3. Consider a circuit breaker. Renting out a spare room, moving somewhere cheaper and leasing out your home or selling up are options you may decide to consider.
4. Get independent financial advice. Call the national debt helpline on 1800 007 007.

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