Kill credit debt for­ever

Aussies have an big ap­petite for credit card debt, writes Sophie Elsworth

The Western Star - - Moneyhq Saver -

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.

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