A recent survey that we ran across 3,000 Australian adults has indicated that there is plenty of debt stress out there. More than one in 4 (28%) of those aged 30 – 39 admit that they worry about their credit card debt and those slightly older Gen X’s (40 – 49 year old) are also worried, at 26%. That’s understandable, as Australians are paying interest on around $33 billion of credit card debt (equating to $15 million in interest payments per day). The statistics echo the habits of visitors to CANSTAR’s site, with 21% of the more than 15,000 Australians who used CANSTAR’s credit card comparison tables in the first few months of 2016 identifying themselves as being in constant credit.
The percentage of those who are worried is significantly higher in that middle stage of life than it is in the older generations, with just 12% of those aged over 60 worrying about credit card debt. Specifically, this is who is stressed:
- 19% of 18 – 29 year olds
- 28% of 30 – 39 year olds
- 26% of 40 – 49 year olds
- 21% of 50 – 59 year olds
- 12% of 60 – 69 year olds
- 11% of those aged 70+
Struggling to pay off your credit card debt?
So What Do We Make of the Results?
We asked CANSTAR’s chief finance commentator Justine Davies some questions about these findings:
Q: Are the credit card stress figures surprising?
A: It’s not at all surprising really that people in that middle phase of life – generally with a big mortgage, kids to feed and educate, probably car loans and possibly business loans as well – would be the most likely to struggle with credit card debt. Realistically the younger demographics don’t yet have some of those big money drains and the older demographics have done the hard yards and are hopefully in the phase of saving for retirement.
It’s also really concerning though that one in five of those aged 50 – 59 are also worried about their credit card debt. By that stage and age you would hope that they’re through the worst of it and saving for retirement. Those figures would indicate though that a fair proportion of that demographic aren’t there yet. We do know that many in that demographic have teenage kids still, and also that adult kids are staying home for longer – perhaps that contributes towards it…
Q: What are the biggest expenses faced by people aged 30-49?
A: From some research that Moneysmart has done, we know that housing is the single biggest cost for Gen X – it’s the time when your mortgage takes a bigger chunk of your take-home pay. Transport costs also increase as the family size increases – don’t we all love those weekend sport commutes! And food costs are also much larger for Gen X families. It’s like a perfect storm! So understandably, families might end up putting some of those costs onto their credit card – and then struggle to pay it off.
Q: How can Australians better manage credit card debt?
A: If you are a person who continually owes a balance on your credit card, a few tips to better manage debt include:
- If you’re are in debt and struggling, consider looking for a balance transfer offer that provides 0% interest for a long period of time – that can sometimes be a way to set up a repayment plan to get your debt paid off. There are a few traps with that though, so you do need to be disciplined – don’t use it as an excuse to end up with simply one more credit card! Check out these tips to pay off debt. Otherwise perhaps consider a low-rate card – credit card interest rates vary from less than 8 percent to more than 24 percent and the average is 17 percent. So checking your interest rate and, if you’re in debt, making sure it’s low is essential.
- If you’re really struggling with debt then try to avoid credit altogether – debit cards have the same functionality but without the loan element.
- Also – and this is more a message for younger Aussies – try to enter your thirties debt free. While a bit of credit card debt might be easy to manage when you don’t have many financial commitments, it can become almost impossible to pay off once you’re loaded with mortgage and maybe a child and perhaps reduced family income while you look after your child – heading into that stage of life with debt hanging over your head means there’s a real risk that that debt will just tick along quietly for the next ten years!
Q: Do many people choose reward cards when perhaps they shouldn’t?
A: Based on the search activity of more than 15,000 Australians who have used CANSTAR’s credit card comparison tables so far this year, I suspect that quite a few people are tempted by rewards when really they should perhaps be looking for a low-rate, no frills card. Approximately 70 percent of people are looking for a gold or platinum card, and more than 40 percent are specifically looking for a rewards program. Rewards cards and other Gold and platinum cards tend to have a higher interest rate – because they have more features – than a low-rate card.
Don’t get me wrong, these cards can be fantastic if you’re a disciplined credit card user, but if you’re paying interest each month then chances are that any “benefit” you get may be outweighed by the cost.