“A concerning trend” - Mozo finds 4 in 10 credit card holders racking up debt on everyday expenses
Credit cards are typically used to fund items that Aussies can’t wait to have, but according to new Mozo research, 4 in 10 credit card holders are using their plastic to pay for everyday expenses, like groceries and bills.
And with this spending came the all too familiar feeling of debt, as the research also revealed,that more than half of credit card holders have experienced credit card debt at one stage, with 1 in 5 continuing to hold long-term debt.
“Our survey into Australia’s credit card habits has uncovered a few worrying trends with around 20% of cardholders carrying credit card debt for three years or more. Of those weighed down by long term credit card debt, 1 in 10 have carried it for more than a decade,” said Mozo Director, Kirsty Lamont.
Big ticket items like holidays and new gadgets accounted for 37% of debt, while 33% came from entertainment expenses and trendy clothes and shoes, but according to Lamont, it’s our weekly grocery shop that’s a cause for concern.
“The surprising thing is that the majority of cardholders aren’t racking up credit card debt on life’s luxuries like lavish holidays, designer threads or the latest gadgets but on the everyday essentials like groceries or bills.”
“Australians putting their fixed expenses on credit is a concerning trend, and one which is likely to worsen in the near future if the cost of living continues to skyrocket and national incomes trail behind.”
When asked about the possibility of blasting debt once and for all, a massive 45% revealed that they couldn’t afford to do it. Other reasons included ‘other money priorities’ (30%), forgetting to pay (8%) and procrastination (8%).
“Owning a credit card can make it easy to spend beyond your means. It’s becoming apparent that many cardholders are digging themselves into a trap they can’t afford to get out of, all the while being punished by interest rates around the 17% mark,” says Lamont.
But the news wasn’t all bad, as 96% of Aussies had hope that they’d completely pay off their debt at some point - 60% of card holders even revealed that within the next 6 months they’d be debt free.
“It’s encouraging to see that many credit card debt holders have the intention of getting financially fit over the coming year. The key is to look at your spending habits and create a plan to knock out your debt,” says Lamont.
Mozo’s top tips for clearing credit card debt
Credit card comparisons on Mozo - page last updated September 12, 2020
Westpac Low Rate
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CUA Low Rate Credit Card
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Bank of Melbourne Vertigo
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NAB Low Rate Card
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Bankwest Breeze Mastercard
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St.George No Annual Fee
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Bankwest Zero Mastercard
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Bank of Melbourne Amplify Signature
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CUA Platinum Credit Card
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BankSA Amplify Platinum
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Bankwest Breeze Platinum Mastercard
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Bankwest Zero Platinum Mastercard
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- Let go of the plastic - Cut off the problem at the source by going cold turkey with any plastic spending.
- Try to pay more than the minimum - If you are unable to pay the full balance amount, make sure to at least pay more than the minimum repayment.
- Use any spare funds - Take any spare cash you come into contact with, such as a tax return or gift and put it towards your credit card balance.
- Take up a side hustle - Stay on top of your repayments by considering a side job, like a weekly Uber shift.
Having a balance transfer card might also be your answer for clearing credit card debt, as you’ll be able to gradually pay off your debt without any interest for up to 24 months. You can check out Mozo’s credit card comparison tool to compare some of the latest deals on balance transfer credit cards.
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