Credit card pain spreads

Those having trouble with debt should take action, writes Sophie Elsworth

THE nation’s multi-billion credit card bill is one of the most costly debts hurting cashstrapped Australians, as many rush to seek relief during the pandemic.

New figures released today from the Australian Banking Association show more than 50,300 Australians have sought some sort of financial assistance on unsecured debts including credit cards and personal loans totalling $859 million.

Banks have offered a series of measures, including repayment deferrals and interest rate waivers for set periods.

One of the nation’s largest lenders, Westpac, is offering customers who have lost their job or suffered income loss the option to pause their credit card interest charges and repayments for a three-month period.

Applicable customers will not be charged or have interest accrue on amounts owing during this time.

This includes existing and new card purchases and cash advances, and they are not required to make repayments.

During this period customers can continue using their cards, but they should do so with extreme caution as it means they will left with even higher debts later on.

Westpac chief executive of consumer David Lindberg said more than 40,000 customers had applied for assistance.

“Now is a good time to review your household budget and think about a plan for managing your money over the coming months, particularly if your circumstances have changed,” he said.

“It’s important to manage your credit card effectively, so if you do require assistance, we would encourage you to apply as soon as possible so you can get the help you need.”

Credit card interest rates remain stubbornly high – many are above 20 per cent – but some

offers are as low as 7.49 per cent.

Latest figures from the Reserve Bank of Australia show our credit card debt bills sit at $41.5 billion and $26.9 billion of that is accruing interest.

Australian Banking Association chief executive officer Anna Bligh said there was plenty of help available for hard-up customers struggling with credit card debt and personal loans, as well as business loans and mortgages.

“Bank call centres have been and continue to be inundated with people needing help,” she said. “Many of these people have never had to ask for assistance before in their lives and may never again.

“I would strongly urge anyone who needs support to contact their bank.”

ING – one of the nation’s largest banks, behind the big four – also offers the deferral of card repayments for cashstrapped customers.

The bank’s consumer lending lead, Fiona Prater, said for those struggling with card debt “it’s important to know if you miss a payment this could affect your credit rating”.

“When talking to your bank, ask what options are available,” she said. “It might be that you can take a payment pause for three to six months, but be mindful that your balance at the end of the pause is likely to be higher than what it was at the beginning.

“This is because the interest and fees will probably accrue during the pause.

“Be aware your card might also be deactivated during a payment pause.”