May 27, 2015
$5,000 of credit card debt could take 22 years to repay
More than 50% of Australians have some form of credit card debt, new research has revealed.
According to Mortgage Choice’s 2015 Money Survey, 57.5% of Australians have credit card debt – up slightly on the previous year.
Of those with some form of credit card debt, more one third of respondents have in excess of $5,000 worth of debt.
When those with credit cards were asked how much debt they had, 35.4% said they had more than $5,000 – the same level as this time last year.
On the flipside, less than 11% of Australians said they had under $500 in credit card debt. Furthermore, few Australians indicated that they actually pay their credit card off in full each month, with the majority preferring to pay just some of their debt off each month.
If Australians are going to have credit cards, it is good to pay them off in full each month, rather than just a bit at a time.
Credit card interest rates are notoriously high. Constant use without complete payment at the end of the month can lead to significant debt.
Many people get stuck using a credit card and struggle to break the cycle as interest continues to accrue. As such, it is always important to make paying off your credit card a priority.
Those who choose to just make the minimum repayment each month on their credit card not only end up paying a lot of interest, but they take a significant amount of time to fully pay off the debt.
Say for example you owe $5,000 on your credit card, which has an interest rate of 14% and you only make the minimum monthly repayment each month. Even if you don’t charge anything else to your card, it will take you almost 22 years to pay off your credit card debt. Worse still, you will have spent almost $11,000 paying off $5,000 of debt.
So when it comes to credit cards, the best plan of attack is to pay them off straight away.
For those who don’t have the discipline needed to pay off their credit card in full each month, debit cards could be an ideal alternative.
Debit cards provide a similar level of protection for online and over the phone purchases, without the significant interest rates.
If you would like learn more about credit cards or hear more budgeting tips, call us on 07 5474 4100