Australian credit card debt statistics you need to know

WeMoney

As of August 2022, over 13 million credit cards are in circulation throughout Australia. Collectively, this has led to an accumulative debt of over $17 billion across all credit card accounts.

While many individuals manage their credit card debt responsibly, ensuring that minimum payments are met and avoiding late fees, many others need help to remain disciplined with their credit card payments and are quickly saddled with card debt they cannot cope with.

Many Australians need to be made aware of the various credit card debt statistics that will have a knock-on effect on credit card interest rates. That is why we have put together this article detailing the most relevant points of interest that all Australian credit card owners should be aware of.

Let’s get to the following commonly asked questions,

  • What is the average credit card debt in Australia?
  • Why do Australians take out credit cards?
  • How have interest rates changed?
  • How do interest rates impact credit?
  • How can I stay on top of my credit card debt?
  • What are some other key debt stats to be aware of?

Q1. What is the average credit card debt in Australia?

As of August 2022, the average credit card debt was reported to be $2907. This is a slight improvement of figures from 2019, where debt was estimated to be just over A$3200.   

This may be down partly because the total number of credit cards in circulation has also dropped slightly since 2019. In contrast, debit card issuance and debit card transactions have both risen during the same period.

This may indicate that Australians are slowly turning away from credit card ownership.

Q2. Why do Australians take out credit cards?

Personal credit cards and other forms of personal loans have always been popular financing. The reasons for deciding to take on this form of debt are varied.

The biggest reason for taking out a credit card is to cover emergency payments (41%). This is followed by many Australians wishing to take advantage of rewards credit cards (38%). 

The third biggest reason is for larger luxury purchases (21%), and it is perhaps this more than anything that is driving Australian credit card debt. Indeed, much of the recent accrued debt was reportedly down to Australians venturing abroad for the first time since 2020, with flights, accommodation, and expensive activities all contributing.  

Other reasons include:

  • Paying off other debt commitments through balance transfer credit cards.
  • Improving credit scoring.
  • Managing unexpected drops in income.

Q3. How have interest rates changed?

To November 2022, there have been seven interest rate rises in Australia this year alone. The Royal Bank of Australia RBA has increased rates to 2.85%, a jump from the November 2020 all-time low of 0.10%.

There are several driving factors behind this rise, with the main reason being a need to balance demand and supply in the Australian economy — to get inflation back to its target level.

Q4. How do interest rates impact credit?

Most credit card debt in Australia is accrued through unsecured loans, meaning the lender has no collateral if the debtor cannot pay off their credit. This differs from a secured credit card, where a debtor must pay a deposit upfront to obtain the card.

This means credit card debt is often a high risk for the lender. In addition, raising interest rates discourages those with weaker financial histories and can compensate via credit card repayment from those who do pay on time.

If you are looking for a low-rate credit card to help with bad credit or to help pay off debt, you can compare credit cards with our comparison tool. Our repayment calculator will help you choose the best card for your circumstances.

Q5. How can I keep my credit card debt under control?

Many believe that a credit card balance is equitable to free money as there is no immediate need for payment. Unfortunately, this mindset can be dangerous and lead to frivolous credit card spending, resulting in heavy interest repayments that are difficult to manage.

Because of this, it is vital that you only use a credit card to spend within your means. This will prevent your interest commitments from spiralling.

With some credit providers, you may have some leeway in arranging how your repayments are collected. For example, certain credit card companies, such as American Express and Westpac, offer instalment plans to pay off your balance in equal instalments over a fixed period, allowing for greater control over budgeting.

If you are struggling to stay on top of your credit debt, you can use a balance transfer credit card which will usually have 0% on interest for a specified welcome period. You could also take out a debt consolidation loan if you manage multiple smaller debt commitments simultaneously.

Q6. What are other credit card stats to be aware of?

It might seem like Australia’s credit card debt problem is due to careless decision-making from lenders when assessing suitability. However, according to Finder, 8% of Australians have been rejected for a credit card. The main reasons behind this rejection are irregular income (36%), too much existing debt (22%), and a poor credit score (21%).

While the total number of credit cards issued has dropped slightly in the last couple of years, the total number of credit card purchases has never been higher, with the number hitting three billion for the first time in 2021. Additionally, the total purchase spending among Australians hit $317 billion in 2021, the third-highest total on record.

However, on a more positive note, the average balance per credit card has decreased over the past two years, with the average Australian having a balance of $2,801.

In summary

Credit cards are a common way for many Australians to manage their credit and debt, but if you don’t keep on top of the repayments, you could end up in a downward financial spiral. Remember that debt relief is available if you struggle to repay your credit card limit.

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Disclaimer: The author is not a financial advisor, and the information provided is general and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.

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