Less income means more credit card debt

12 December 2016

 A survey of over 50,000 consumers has found direct correlation between level of income and ongoing credit card debt 

It does sound self-evident, but the latest findings from Roy Morgan’s Single Source survey of over 50,000 consumers confirm that there is a correlation between an individual’s level of annual income and the level of ongoing credit card debt they have in terms of percentage of income.

According to the survey, major card holders with incomes of under $25,000 pa, carry forward $1,100 of credit card debt on average, which represents 8.9% of their annual income. Cardholders in this income group account for a third of all major card holders.

As income increases, the average amount carried forward represents a declining proportion of the cardholder’s income. For the highest income group of $250,000+ pa, the average debt was $2,500, less than one percent (0.9%) of their average income – although it is interesting that cardholders in this income category would still have the need of ongoing credit card debt.

Source: Roy Morgan Single Source (Australia); 12 months ended October 2016, n=50,577. Includes 39,084 with major cards.

Credit cards are certainly popular, with more than 16 million credit cards currently in use around the country. And analysis of Canstar visitors to the Canstar credit card selector tables shows that rewards credit cards (with higher average interest rates) remain enduringly popular. In terms of features, the availability of a rewards program is the single most-sought feature, attracting more than one-third of all searches.

“Around Christmas in particular, the level of debt on major cards is likely to get some adverse publicity,” said Norman Morris, Industry Communications Director, Roy Morgan Research.

“Some potential problem areas … are those cardholders with incomes of less than $25,000 pa, where around 80% carry over some debt. People with incomes over $90,000 are coping well, particularly those earning $250,000 or more, among whom well over half (56.8%) carry over zero or less than $100.”

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