Kill credit debt forever

Aussies have an big appetite for credit card debt, writes

Sophie Elsworth

THE nation’s addiction to food delivery services and dining out is hitting our hip pockets hard and many concede it’s a factor to regular budget blowouts.

The boom in online food delivery sources such as Ubereats, Deliveroo and Foodora is contributing to financial pain as many Australians turn to credit to make discretionary purchases.

New independent research commissioned by Tribeca Financial questioned 1000 Australians about their spending habits. It found 44 per cent of people create debt with indiscriminate purchases such as on takeaway meals or dining out.

But it’s not just our spending habits doing us harm, one in three Australians confess they are also poor financial managers and don’t know how to do things such as budget.

They also turn to credit card cash advances and pay little attention to debt.

Tribeca Financial’s chief executive officer Ryan Watson urged Australians “to cut up their credit cards” and set a plan of attack to pay them off once and for all.

“Discretionary spending really adds up and it often results in people being short of money,” he said.

“Credit cards have expensive interest rates that people can’t pay off and then they are stuck in a cycle.”

Mr Watson urged consumers to stop using their credit cards, cut them up and set a realistic 12 month goal to pay them off in full to break the credit card debt cycle.

Latest Reserve Bank of Australia statistics found Australians owed $51 billion on plastic and more than $31.5 billion is accruing interest.

Typically credit card interest rates range from 7.49 per cent up to 24.99 per cent.

Recent Australian Prudential and Regulation Authority statistics found credit card lending is down a record 5 per cent in the past year – the biggest fall in 14 years.

However, this could be as a result of many shoppers turning to buy now, pay later schemes such as Afterpay and Zip Pay, which has climbed five fold, from 400,000 to 2 million users over the 2015-16 to 201718 financial year.

At June 30 last year, more than $903 million was outstanding on these schemes.

Consumer finance expert Lisa Montgomery said many people “supplement their income with a credit card”.

“The only way to break this cycle is to get uncomfortable and take a good look at what you’re spending and modify that,” she said.

“If you are getting that bill every month and it’s creating a feeling of stress or creating the inability to pay it – and it’s repeating – then you are in a debt cycle.”

She urged millions of Australians getting a tax refund soon to use it to pay off their high interest debt, such as a credit card, and get their budget back on track.