It is apparent that Australians are getting better at managing their credit card debts by avoiding high interest fees.
Reserve Bank has recently released new data showing that local credit card cardholders have significantly cut the amount of interest they are paying on their cards despite the fact that credit card interest rates have remained the same in recent years, which are close to 20 per cent.
Overall, the nation’s credit card debt that causes interest fees has dropped 11 per cent in the last four years, saving consumers more than $700 million dollars. However, the nation’s current credit card debt is sitting at a whopping high of $52.2 billion dollars.
Lisa Montgomery, Consumer Finance Specialist at Reserve Bank, explains that Australians are getting smarter about keeping on top of their credit card debts, and many customers are taking advantage of balance transfer cards that offer zero per cent interest, usually for a total of twelve months.
“We have become a lot more savvy about what we use and how much it’s costing us,” Montgomery states.
Finder.com.au analysed the new data and discovered that, in the last twelve months, consumers paid off almost $10 billion more than they actually spent on their credit cards.
Finder Spokeswoman Bessie Hassan believes that this trend will continue. “I think Aussies are waking up to the fact that they are spending too much on credit card interest,” she states.
A standard credit card charges consumers interest rates close to 20 per cent per year. A personal loan charges around 10 per cent interest and mortgage loans around 5 per cent. This means $10,000 owing on a credit card can be as much as a $2000 interest fee per year, which is four times as much as if it was owed on a mortgage.
Ms Hassan shares her advice to credit card holders and says, “the best way to beat credit card interest is to repay the debt every month, within the interest-free period, and limit your spending behaviour if necessary.”
Perhaps consumers have finally realised how hefty interest rates can be on their credit cards and are finding a better way to manage and handle their credit card debt.