NZ’s outstanding annual credit card bill hits $700m

New Zealand’s credit card habits cost close to $700 million in interest last year.

Data from research firm Canstar shows credit card spending has increased by almost half since the global financial crisis (GFC). It’s expected that the country will have put $43 billion on cards by the end of this year.

But we only pay off about a third of that in full each month, leaving the rest to attract interest at a significant rate.

Credit card users in this country had an outstanding interest-bearing balance of $716m between November 2016 and October 2017, compared with $710m in the 12 months before.

The average interest rate charged dropped slightly, from 18.1 per cent to 17.8 per cent, taking the total interest bill to $700m.

‘‘In the post-GFC years we’ve increased our appetite for spending, but, unfortunately, not for paying it back,’’ Canstar general manager Jose George said.

‘‘In recent years a number of credit card providers have introduced more low rate/low fee options to consumers, but visits to our website suggest that credit cards offering rewards, and often higher rates of interest, remain the most popular option for Kiwis.’’

Canstar research suggests that rewards cards can start to offer value-add for annual spend of at least $8000 per annum and for consumers who are disciplined at paying off their balance in full.

The annual fees, and the higher rates of interest the cards charged, often made them unsuitable for people who did not do so.

Canstar pointed to the Visa Light card as a good low-fee and low-rate option, while The CoOperative Bank’s Fair Rate card was good for those after a low rate.

The Onecard Visa and Warehouse Purple Visa were the best option for rewards for customers who spent $12,000 a year on their cards.