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Credit card debt falls to lowest levels since 2004
Early access to superannuation, a lack of places to spend money and low consumer confidence has seen Australians pay off $6.3 billion in credit since the pandemic began, new research has revealed.
Credit card debt falls to lowest levels since 2004
Early access to superannuation, a lack of places to spend money and low consumer confidence has seen Australians pay off $6.3 billion in credit since the pandemic began, new research has revealed.
Stats released by the Reserve Bank of Australia (RBA) have shown that consumer debt fell to 2004 levels.
Australians have also been cutting up their cards in droves. The number of credit card accounts has dropped by over half a million since the end of March, and 1.4 million year-on-year, hitting the lowest level since April 2008.
Sally Tindall, research director at Rate City, said Australians were continuing to chip away at credit card balances in August with an $831 million drop in debt accruing interest from the previous month.
“While Australians have made yet another dent in credit card balances accruing interest, the rate at which we’re paying off this debt has started to slow from the peak in May, when a record 1.6 billion was wiped in just one month,” she said.
Canstar’s finance expert, Steve Mickenbecker, said it was not surprising Australians are spending less while under financial stress as well as in lockdown.
“Credit card balances continue to cascade during the pandemic, which is surprising during a period of heightened financial stress and a sign that Australians are building up a contingency for potentially tougher times,” Mr Mickenbecker said.
He also pointed out those who used the Morrison government’s controversial early access to super scheme have used the money to pay down debts.
“The early release of superannuation has put cash in the hands for some, and cardholders are making the logical and conservative decision to knock off credit card debt while they can,” he said.
The finance expert believes this could be a long-term trend with a changing consumer mentality.
“The decline in credit card balances accruing interest has been relentless throughout the pandemic. Even if necessity might see some bounce back into debt, it is clear that the penny has dropped and people are looking for their way out of credit card debt.
“With the number of personal card accounts also down, by over 580,000 since March, it looks as if people have every intention to avoid a recurrence of credit card debt,” Mr Mickenbecker concluded.
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