New year = more debt for Australian credit card holders

Household credit card debt rose by more than a quarter of a billion dollars in the month of January as shoppers struggled to clear their debts following a bumper spendathon in November.

The RBA credit card statistics for the month of January, shows Australia’s total credit card bill attracting interest charges on personal credit cards rose by $269.5 million – the biggest monthly increase in percentage terms since November 2022. This takes Australia’s total credit card bill to $17.58 billion (excluding commercial cards).

At an average interest rate of 18.23 per cent, according to the RBA, Australian households are collectively shelling out just under $8.8 million in interest charges a day.

RBA: Credit card debt attracting interest charges (excludes commercial cards)

Source: RBA, released 7 Mar 2024, original data, excludes commercial cards.

The increase in January comes as no surprise.

Looking back over the RBA records, household credit card debt attracting interest charges has risen every January since 2015, as some households struggle to pay back their pre-Christmas credit card purchases within their interest-free day period, which is typically around 55 days (provided they don’t already have an outstanding debt on the card).

While this is a practice we’ve grown used to seeing, last November was particularly expensive for many households, with the total value of credit and debit card transactions hitting, what was then, a record high.

Credit card debt set to rise even further as Australians give the plastic another workout in January

Australian shoppers broke the record books yet again in January. RateCity.com.au analysis of RBA figures found spending on credit and debit cards hit new highs in the first month of 2024, after a relatively subdued December.

With two consecutive monthly rises in credit card debt already notched up, the concern is this debt will continue to climb in the months ahead as some shoppers struggle to balance the budget after this record month of spending in January.

Total value of transactions: personal credit and debit cards

Source: RBA, released 7 Mar 2024, seasonally adjusted data, excludes commercial cards.

The number of credit card accounts continue to rise, but at slower pace

The number of credit card accounts also continued to rise, although January only saw an increase of just over 10,000 accounts, significantly less than the increase posted in December of over 30,000.

RBA credit card statistics: January 2024 (Note: commercial cards are excluded)

Source: RBA, released 7 Mar 2024, original data, excludes commercial cards.

Tips for managing credit card debt

Check you’ve got the right card in your wallet for your finances: if you are regularly getting hit with interest charges on a high rate, high fee rewards card, it could be time to switch to something that’s going to suit your finances better.

Control your own fortune: don’t let your credit card company decide how much you can spend. Set yourself a strict limit that you know you can clear every month.

If you slip up, ask for mercy: if you forget to pay your bill in full one month, call your provider and ask them to waive the charges. Everyone makes mistakes and if it’s a one off, they might say yes.

Know that annual fees are optional: credit cards often come with annual fees that run well into the hundreds of dollars. Diarise when your next annual fee is due, and ask your provider to waive the charges before you get hit with this unnecessary fee.

Don’t use your credit card to plug a hole in your budget: it might feel like a quick fix at the time, but putting recurring expenses on a credit card can easily get out of hand. If your budget doesn’t add up, make structural changes, not temporary ones.

If you’re carrying around a wad of debt, make a plan to get rid of it: Consolidating your debt on to a personal loan could force you to pay the whole debt off in a reasonable timeframe without the temptation to add to it.

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