If having debt on your credit card makes you anxious, you’re not alone. New research from credit bureau Experian found a whooping 84% of Australians would worry if they skipped a credit card repayment, but nearly half don’t make their repayments on time.
The findings, released this week, suggest many Aussies aren’t comfortable with the amount of credit card debt they’ve piled up. Despite 42% of survey respondents admitting they aren’t punctual with their monthly repayments, one quarter said they don’t want any debt while another 55% noted they are only willing to owe a low sum between $1,000 to $4,000.
Forgetfulness was listed as the top reason for Aussies being unable to make credit cards repayments on time, with 48% saying the due date simply slips their mind.
Experian’s General Manager for Credit Services ANZ, Tristan Taylor, called this “a worrying finding when we consider the impact of just one missed repayment”.
“In many cases consumers have multiple credit cards and are unable to keep track of which card needs to be paid off and when,” Taylor said.
A further 44% said they can’t afford to pay off their credit card debt every month, and 28% indicated it’s within their financial means to repay just a part of the minimum sum.
“This could again stem from having multiple cards, leading to difficulty tracking how much is due over the month, or encountering unexpected financial issues such as taking a pay cut for a new job or non-planned expenses,” Taylor said.
How to wave goodbye to credit card debt
But it’s not all doom and gloom. Here are five tips to get you started on making your credit card repayments on time, so you don’t end up with a massive bill that’ll cost you an arm and a leg:
1. Set timely reminders
Since many Aussies are getting into credit card debt because they’re forgetting or missing their repayment date, an easy solution is to get organised and set better reminders - whether that’s jotting the date down on your calendar or setting an alarm on your phone.
And make sure to set those reminders a day or two before the due date so you’ve got time to get your payment together.
2. Track your spending and create a budget
But what if you can’t make your credit card repayments because you’re coming short on cash every month? That’s when you’ll need to track your expenses and create a budget - the more airtight, the better.
“There is no point making a purchase on credit if you will be unable to afford the repayments,” Taylor said. “Look ahead to see if there are any big expenses on the horizon like a holiday or car registration which may impact your disposable income and take this into account when using your credit card.”
When it comes to paying off your debt, start by calculating your monthly income, and then identify all your necessary expenses, like rent, groceries, utilities or petrol. Set money aside for these essentials first - there’s no point making a huge credit card repayment, only to find you’ll have to use that same card to pay your rent.
Then, prioritise paying off your debt with your spare cash. For a while, you might have to cut right back on fun spending and socialising with friends, but in the long run, you’ll be much happier being debt free.
3. Keep an emergency kitty
Life can throw unexpected things at us, whether it’s your car breaking down or losing your job. And that means having to handle big expenses you haven’t factored into your budget.
“In these events, if you have to also manage outstanding credit card repayments, finances can be tight,” Taylor said.
So, once you’ve paid off outstanding debt, building an emergency savings fund separate from your everyday account is a great way to keep you on track to making your credit card repayments while also dealing with sudden, unexpected expenses in the future, without relying on credit.
4. Consolidate your debt
If having multiple credit cards is what’s making you lose track of your repayments, then a debt consolidation loan could be the way to go. This means combining all your debt into one easy-to-manage loan, which will usually have a much lower interest rate. Plus, it means you’ll only have one repayment to keep track of, so you’re less likely to miss or forget about all the repayments you have to meet every month.
5. Choose a better-value credit card
Not ready to put down the plastic? Then it may be time to switch your credit card for a deal with lower interest rates and no annual fees.
For spenders who have a habit of carrying a credit card balance, a card with a low interest rate can help to minimise the damage done to your budget.
On a low rate credit card, you could be paying less than half the annual interest you’d otherwise pay if you used a card with the average rate.
Take one scenario, where you have a $3,000 credit balance and are making only the 2% minimum repayment each month:
- If your card has an interest rate of 17.10%, the average as of July 2019, you’d pay $497 in interest over a year.
- But if your card had the lowest rate in our database, 7.49%, you’d only pay $209 in interest over the year.
Check out our low rate credit card comparison table to find a new card that suits you best.
Still unsure? Punch in the numbers on our Switch and Save calculator to see how much you could be saving if you traded in your old credit card for a better-value one.
Low rate credit cards - last updated January 16, 2021
Bendigo Bank Low Rate Credit Card
Bendigo Bank Low Rate Credit CardDetails
Bankwest Breeze Mastercard
Bankwest Breeze MastercardDetails
Defence Bank Foundation Credit Card
Defence Bank Foundation Credit CardDetails
ME frank Credit Card
ME frank Credit CardDetails
^See information about the Mozo Experts Choice Credit Cards Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.