Australia’s national credit card debt drops to lowest level in 18 years during COVID-19
Perhaps more importantly, the number of personal credit card accounts fell by 1.2 million during the COVID-19 pandemic, suggesting that users are tightening their family debts or prefer to use shopping options now. -pay later such as Afterpay instead of a credit card.
The number of credit card accounts in Australia is now at its lowest level since December 2006.
RateCity.com.au’s research director, Sally Tindall, said the real test will take place to see if credit card-addicted Australians can manage their debt during the traditional high-spending Christmas season.
“The number of accounts continues to decline as customers permanently turn their backs on credit cards, with many moving to the market buy now, pay later for their credit correction,” Ms. Tindall said.
“A lot of people assume that buying now, paying later is a relatively safe form of debt because it doesn’t attract interest.”
Steve Mickenbecker, group director of financial services at Canstar, said the prolonged lockdowns have helped many households cut discretionary spending and reduce existing debt.
“The foreclosure is good for household balance sheets, with Australians writing off an additional $ 645 million in personal credit card debt accumulating interest in September,” Mickenbecker said.
“Total interest-bearing personal credit card debt is now down $ 9.5 billion from the pre-COVID period in February 2020.”
Ms Tindall said the key to using BNPL services – or indeed credit cards – is to be careful in your ability to pay it off on time.
“These platforms can be interest-free, however, they often come with high late fees and can lead to overspending if people are not careful,” Ms. Tindall said.
“Whether you use a credit card or buy now, pay for the service later, think carefully about how much debt you incur, and be sure to write it off before you charge extra fees.”
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