AUSTRALIANS owe a record $49.4 billion on credit cards with households maxing their plastic to cover escalating living costs.
- Credit card debt nudges $50 billion
- One in three to struggle with repayments
- Low-income earners reliant on plastic
The number of credit and charge card accounts is about to top 15 million, an increase of almost 20 per cent in the past five years with an average debt of $3,322 a card.
However, the amount a typical family owes on plastic is likely to be much higher as many households are juggling repayments on two or more cards.
The massive mountain of debt will continue to escalate indefinitely with many lenders charging interest rates on credit card accounts four times higher than the official RBA cash rate of 4.75 per cent.
More than two-thirds of consumers’ outstanding debt is accruing interest at the average rate of nearly 20 per cent - a 20-year high.
Meanwhile, despite the record number of Australians on struggle street, one in three consumers expect to use their plastic during the September quarter to purchase something they could otherwise not afford, new research shows.
A fifth of consumers expect their household debt levels to rise in the September quarter and the same proportion say they will apply for a new credit product during that time, a Dun & Bradstreet survey of 1226 consumers found.
Almost 30 per cent of people expect to have difficulty meeting credit commitments in the next three months, despite trying to cut back on spending and credit use over the past two years, the survey found.
The only positive news is that only a quarter plan to make a major purchase, down 6 per cent from two years ago.
The survey showed that consumers with the least ability to repay debt were the most reliant on credit, Dun & Bradstreet's chief executive Christine Christian said.
Almost half of low income earners (earning under $40,000 a year) have a credit card, Ms Christian said.
"We are seeing the most likely demographics to use credit, particularly as a last resort, are also the least able to manage that debt," she said.
Consumer caution
In other alarming data this week, consumer confidence has fallen to its lowest level since the height of the global financial crisis, ahead of the introduction of a price on carbon.
The Westpac-Melbourne Institute index of consumer sentiment fell 8.3 per cent to 92.8 in July, down from 101.2 in June.
Sentiment fell hardest among high-income earners, who were worst hit by the carbon pricing scheme as compensation is targeted at middle and low income earners.
By Sonja Koremans, Money Editor. Source: www.news.com.au
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