With just over $31 billion of Australian credit card debt currently on the books (ASIC), and just over $5 billion of credit card interest being charged on that $30 billion – it’s clear that the Australian passion for using a card is an expensive one. It’s resulted in an average Australian credit card debt of $4,154.86 per cardholder. On top of that, based on figures from the Reserve Bank of Australia, Canstar estimates that Australians collectively paid more than $35 billion in credit card interest in the past four years from August 2012 to August 2016.
While the size of that figure can in part be explained by our incredibly high credit card interest rates, credit card debt doesn’t just appear out of nowhere. Some of us just don’t know how to be smart with our credit cards, and that nationwide lack of financial smarts has racked up a $35 billion bill.
We could be doing a lot more than paying credit card interest
$35 billion is a staggering amount; it’s also one that, if it were redirected to the Federal Government, would almost wipe out the entire current deficit, which stands at $37.1 billion. This would subsequently eliminate the need for measures such as funding cuts to higher education and complex healthcare at aged-care providers, and (presumably) put an end to the government’s continued efforts to cut the family tax benefit.
|Credit Card Interest Rates on Canstar’s Database|
|Highest interest rate||22.99% p.a.|
|Lowest interest rate||8.99% p.a.|
|Average interest rate||19.10% p.a.|
Source: Canstar, current as at October 2016
Of course, we’re not saying that consumers should be giving that extra money to the government at all; we’re simply putting the amount of credit card interest that we all pay into perspective. Credit cards can be fantastic cash-flow tools, but only if you use them wisely.
Here’s an overview of some of the funding cuts outlined in the most recent federal budget that would be completely unnecessary if the government had an extra $35 billion handy.
|Federal Budget savings initiative 2016||Estimated total savings/revenue over 4 yrs|
|Cuts to university funding||$2 billion in savings|
|Tobacco tax||$4.7 billion in revenue|
|Cuts to National Disability Insurance Scheme Savings Fund||$2.2 billion in savings|
|Pause on Medicare rebate indexation||$0.9 billion in savings|
|Cuts to welfare||$1.29 billion in savings|
|Average credit card interest||$35 billion|
Source: Federal Budget 2016-17
And those are just the larger measures! The 2016-17 Budget contained a huge number of “saving measures” designed to narrow the deficit, which wouldn’t be necessary if the government was able to make use of the money we are essentially throwing away on credit card interest payments.
The silver lining in the cloud of our nation’s credit card debt
It’s not all doom and gloom when it comes to the overall state of credit card debt in Australia. As CommSec points out, interest aside, credit card debt is actually at its lowest in 8.5 years!
— CommSec (@CommSec) 12 October 2016
We’re not sure this piece of good news would be particularly comforting to the average Australian with an outstanding credit card balance, but it’s good news nevertheless.
Note that the figure quoted by CommSec differs to the ASIC figure of $4,154.86 we quoted at the start of the article due to a few factors:
- ASIC’s credit card debt clock, while based on RBA figures, provides a real-time estimate of current debt based on yearly trends, whereas CommSec is quoting a specific figure for one month of the year.
- ASIC’s credit card debt clock presumably takes interest into account, whereas CommSec is talking solely about the average balance before interest owed.
When it comes to credit card interest, who offers outstanding value?
If you’re considering changing credit cards, there’s definitely no shortage of credit card providers vying for your business. To help you compare the products available, Canstar has looked at 169 credit cards across 60 lenders in our 2016 star ratings report, assessing the value offerings for each category of credit card.
In 2016, we found:
- 15 Low Rate credit cards that offer outstanding value
- 14 Low Fee credit cards that offer outstanding value
- 1 Zero Fee credit card that offers outstanding value
- 4 Balance Transfer credit cards that offer outstanding value
- 21 Premium credit cards that offer outstanding value
- 12 Rewards credit cards that offer outstanding value
- 13 Frequent Flyer credit cards that offer outstanding value
- 8 Platinum credit cards that offer outstanding value
Canstar’s credit card star ratings are an invaluable starting point when creating a shopping list of credit cards that match your spending profile. View the complete star ratings report here, or use our comparison tool to find the perfect credit card for you.
If you’re currently comparing credit cards, the comparison table below displays some of the low interest credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the provider’s website, and is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s credit card comparison selector to view a wider range of credit cards.