Over the limit: Pandemic pushes 2 million Aussies beyond credit means

• • • • 2.1 million Australians have gone over their credit limit since March.
      • The average credit limit per borrower is $9,892.
      • We list 3 ways to keep your credit utilisation under control.

8 October 2020, Sydney, Australia – Soaring unemployment and wage cuts have seen people increasingly overdrawing their credit cards, according to Finder, Australia's most visited comparison site.

A new Finder survey found that 15% of credit card holders have gone over their limit during the pandemic – equivalent to more than 2 million borrowers (2,113,350).

While 8% of card holders have paid their debt down under the credit limit, 7% are still currently over.

According to the Reserve Bank of Australia, the average credit limit per borrower is $9,892, and there are just over 14 million credit cards in circulation.

While official data shows that credit card balances accruing interest dropped during the height of coronavirus (from $1,877 in February to $1,647 in June), repayments against those interest accruing balances dropped (from 103% in February to 89% in May).

Kate Browne, personal finance expert at Finder, said that some Australians were entering a credit card danger zone.

"Even missing one or two payments can become a slippery slope that can spiral out of control quickly.

"Missing payments not only adds to financial stress but can also impact your credit score. Your credit score is your financial identity and is how lenders view you. If you are missing payments, your credit score and your financial credibility can be put at risk.

"You can keep an eye on your finances and your credit score for free by downloading the Finder app."

The research highlighted that more women (18%) went over the limit on their credit card during the pandemic than men (13%).

1 in 4 millennials (26%) were overdrawn on their credit card at some point during the coronavirus pandemic, with more than 1 in 10 (11%) still unable to resolve the issue.

Browne said that the true scale of the financial stress experienced by many Aussie adults due to coronavirus is yet to be fully felt.

"In light of proposed changes to responsible lending laws, it will soon be easier than ever for Australians to access credit – which could mean some people accumulating more debt than they can handle.

"The onus will be on borrowers to provide accurate information that shows their true ability to service a loan.

"If you are struggling to make repayments, contact your bank immediately to discuss the options available to you.

"They may be able to organise a repayment plan to help you get your debt under control."

Source: Finder, September 2020 survey

3 ways to keep your credit utilisation under control

• Impose a hard limit on your credit card account. If your provider allows you to spend over your credit limit, let them know that you want to impose a "hard limit" on your credit card account. This means that once you reach your credit limit, any transaction that would have taken you over the limit will be declined.
• Set up online, mobile or telephone banking. You can download your bank's app onto your smartphone and monitor your balance at any time. Lenders are required by law to notify you when you're about to exceed your limit. If you have online, mobile or telephone banking set up, your provider can send you a text notification when you're about to exceed your credit limit.
• Make more regular repayments. Even though credit card statements are only issued monthly, you can make weekly or fortnightly payments that could help you pay off your debt faster.