Over the last few months, we’ve seen the Covid-19 pandemic affect all aspects of day-to-day life, from grocery shopping to heading into work.
But according to new Mozo research, it seems like it may have had a positive impact on the way we think about debt.
Before the pandemic hit, a considerable 67% of Aussies believed that debt was a ‘necessary part of everyday life’, but now one in four are reportedly working toward erasing debt for good.
“Historically, Australians haven’t been afraid of debt, particularly through our love of credit cards. We’ve racked up debt with the assumption that job security and a steady paycheck is a relatively safe bet, but a global pandemic has tipped that notion on its head as unemployment soars,” said Mozo Director, Kirsty Lamont.
“For many people, Covid19 has been a wake up call to get their finances in order, and eliminating debt is a key part of that.”
Mozo found that 68% of Australian households currently have some form of personal debt, like a credit card or personal loan, while 73% of those with debt are concerned about the level it has reached, with one in five unsure how they will repay it.
Taking the first step toward banishing credit card debt
Although credit card balances have fallen by 8.5% in the last two years and the average balance sits under $2,000, many Aussies may be in the dark about making their first move.
One option may be to take out a balance transfer credit card. These allow you to transfer the balance of your current credit card onto another with a 0% interest rate for a certain period of time. This potentially allows Aussies to save a bundle in interest.
In fact, following a Mozo number crunch using the average credit card debt ($4,200) and a typical interest rate of 16.88%, a balance transfer card with a 0% interest rate could deliver savings of up to $560 over 12 months.
However Lamont has warned that in order for a balance transfer card to be effective, Aussies will need to have a repayment plan in place to avoid being stung by interest.
“While balance transfer cards are a great way to put all your debt in one place, it’s crucial for you to use a card with an interest free period that is attainable. It pays to be aware that you can be hit with some massive interest price hikes after the interest free period,” said Lamont.
If you’d like to find out more about how balance transfer credit cards work, check out our handy guide!
0% p.a. for 28 months on balance transfers requested at card application. 0% balance transfer fee applies. Rate then switches to applicable variable cash advance rate. New cards only, Eligibility criteria and T&Cs apply. Offer ends September 28th 2021.