Although the recession has put a brake on the Australians addiction to plastic fantastic, it seems like the latest figures released by the Reserve Bank indicate that credit card debt remains an issue. According to the data issued forth by Australia’s central bank, Aussies are still amassing a massive amount of debt, currently standing at $50 billion. The past two years have seen the level of credit card debt oscillating between $48 and $50 billion – a large amount, by all standards, yet still nowhere near the impressive levels of the three decades that preceded the recession. That span of time saw the level of credit card arrears grow by 28 per cent each year. And while the global financial crisis has made consumers more aware of the impact that credit card debt can have on their lives, it’s likely that both past attitudes and current market regulations continue to influence the way Australians manage their arrears.
Aside from the cold, hard facts that the central bank made public, it seems that commercial banks are also contributing to the problem. The recent credit card reform in Australia has made conditions for inquiring credit card owners about credit limit increases more strict. Nowadays, a credit card holder can only receive an offer for a credit limit increase if they have specifically agreed to be handed such offers. However, they do still receive them, and often enough to actually buy into them. After all, it seems innocent enough: the bank agrees to let you spend more money – but if you’re cautious enough, there’s no need to end up piled-high in debt because of over-spending. What can go wrong?
Quite a lot according to mortgage brokers, including being denied your home loan. The bank’s take on your credit limit is that, the higher it goes, the more likely you are to have trouble in paying back your mortgage. This is especially true for mortgage loan applicants who have several credit cards and who do not spend up to their credit limit. The advice from Bankwest Credit cards is for credit card holders to be on their ‘best behavior’ in paying back the credit in time and in full, while also limiting their number of owned credit cards to the absolute bare minimum.
The way things stand right now, with many consumers seeking to lower their debt, it still looks like Australians are a long way away from paying off their credit card debt in full. According to a December survey, carried out by a banking product comparison website, some 11 per cent of the people polled acknowledged they were only making minimum repayments of their credit card debt each month. That means roughly 1.7 million credit cards are still largely unpaid for – and it’s going to take a lot of time to fully cover
that debt. A spokesperson of the website that carried out the poll said that, at an average minimum monthly payment of 2 per cent, with an average balance of over $3,200, it would take holders almost a quarter of a century to fully pay back their credit card purchases. On the one hand, that means the holder would be paying more than double the balance in debt alone. On the other, it draws attention to an even more jarring fact: paying off a credit card in full could take 24 years and 5 months, well over the average time span for paying off a mortgage.