$5.5 billion credit card debt wiped out during COVID

Australians have wiped a total of $5.5 billion of debt accruing interest from their credit cards since the start of COVID-19, a drop of 20 per cent, according to new RBA figures released today.

During this time Australians also took the scissors to their credit cards, closing almost half a million accounts in four months.

Notes: excludes commercial cards, using original data from the RBA. Data released 7 September 2020.

Credit card trends

Year-on-year, debt accruing interest has dropped by $7.3 billion, while the number of credit card accounts has fallen by 1.4 million.

However, month-on-month, Australians used their credit cards 1.7 million times more in July compared to June.

Notes: excludes commercial cards, using original data from the RBA. Data released 7 September 2020.

Sally Tindall, research director at RateCity, said; “One of the few positives from the COVID-19 pandemic is that credit card debt is being kicked to the curb.”

“Credit card debt is one of the worst types of debt, with interest rates climbing as high as 24.99 per cent. Getting rid of it will free up space in the family budget before the government scales back COVID relief payments”, she said.

“Not only are we clearing debt, but almost half a million accounts have been closed down since the pandemic came. By shutting down a credit card, you’ve cut off the temptation to overspend.

Tax returns and early super release contributing to credit card debt decline

There are two major contributing factors leading to the $1.3 billion wiped off credit card debt in July: tax returns and early access to super.

In the month of July, 1.1 million people accessed their super for a second time taking out on average $8,511, according to APRA.

While 2.6 million people received their tax returns in July, averaging $2,395, according to figures released from the ATO to RateCity.

“Using lump sum payout like tax returns to pay off a credit card that’s accruing interest every month may help families stay afloat in the long run.

“With JobKeeper and Jobseeker getting scaled back, the budgets of many households are about to get a lot tighter. Not having to make regular credit card repayments will take a little pressure off for the tough times ahead.

“However, don’t just swap one debt trap for another, if you’re overspending on buy now, pay later services, then shut down those accounts too,” she said.

Compare credit cards