Tap-and-whoa: Aussies racked up $24 billion on credit cards in December
Funding Christmas festivities with a credit card pushed Australians $24.3 billion deeper into debt, according to new Finder research.
A new forecast of Reserve Bank of Australia (RBA) data analysed by Finder reveals the nation likely borrowed $24.3 billion on credit cards in December 2020.
Worryingly, that works out to be a debt bill of $1,748 per card.
Taking into account an average 55-day interest-free period, it's expected the interest from Christmas shopping will cost Aussies $194 million.
Taylor Blackburn, personal finance specialist at Finder, said many Australians were already experiencing problematic credit card debt before Christmas.
"Aussies spend more on credit cards in December than in any month and it can leave them teetering on the edge, struggling to keep up with repayments.
"This over-reliance on credit cards in December means the cost of Christmas is carried well into the new year and could take a toll on household budgets throughout 2021."
Thanks in large part to the pandemic, this spending figure is down $3 billion from the $28 billion we spent in December 2019.
Blackburn said the festive debt mountain could leave many with money worries for months to come.
"That's particularly worrying now that households are grappling with the economic impacts of COVID-19.
"A balance transfer could give credit card holders the chance to make more headway on their outstanding balance, especially if they're having difficulty making repayments."
According to the Finder database, there are currently more than 100 credit cards offering 0% interest on balance transfer deals, including the Citi Rewards Card which has the longest (30 months) interest-free period.
Finder calculates that transferring the average card rate to 0% for 30 months could save $1,711 on an existing balance of $5,000
"If you do have a debt hangover from Christmas, a balance transfer card might be just the tonic you need.
"But remember – a balance transfer gives you a break on interest, but it isn't a licence to ignore your debt.
"Often, 0% transfer cards will have a higher purchase rate, so if you do a transfer, don't plan to use your new card to spend until your old debt is squashed," Blackburn said.
Top 0% balance transfer cards available on Finder
| Card | Balance transfer offer | Purchase rate | Annual fee | Amount saved |
|---|---|---|---|---|
| Citi Rewards Card | 0% p.a. for 30 months. Interest-free days do not apply to new purchases while you carry a balance transfer debt. | 21.49% p.a. | $49 annual fee for the first year ($149 p.a. thereafter) | $1,711 over 30 months |
| St.George Vertigo Classic | 0% p.a. for 24 months | 13.99% p.a. | $0 annual fee for the first year ($55 p.a. thereafter) | $1,602 over 24 months |
| Westpac Low Rate Card | 0% p.a. for 24 months with 1% balance transfer fee | 13.74% p.a. | $59 | $1,544 over 24 months |
| ANZ Low Rate | 0% p.a. for 25 months with 1.5% balance transfer fee | 12.49% p.a. | $0 annual fee for the first year ($58 p.a. thereafter) | $1,523 over 25 months |
| Coles No Annual Fee Mastercard | 0% p.a. for 12 months | 0% for 12 months, reverts to 19.99% p.a. | $0 | $927 over 12 months |
Source: Finder balance transfers comparison table, amount saved based on $5,000 balance at a current 20.00% p.a. interest rate
Tips to smash credit card debt:
- Reduce your interest rate on your current card: Compare balance transfer (BT) cards and check for interest-free periods. You could potentially save thousands.
- Review your spending: Work out how much you are spending and where to see if there are areas you can cut back. Money management apps like the Finder app can help.
- Leave the card in the drawer: In order to pay down your debt, don't add to it. Especially if you get a 0% balance transfer card to save on interest – don't make new purchases on either card unless it's an emergency.
A balance transfer credit card could save you over $2,000 on a $5,000 debt. Visit Finder's Balance Transfer Credit Card hub to see how much you could save.