Having a wad of credit cards may be out of favour but they’re still handy during a lockdown.
Data released by the Reserve Bank of Australia today, Wednesday 7 July, shows a sharp U-turn in personal credit growth this year, after plunging in 2020 when many people raided their savings to pay down debt.
Australians in May added almost $100 million in personal credit card debt, with interest pushing the total owed just above $20 billion.
But there are fewer accounts, down more than 850,000 on a year earlier to hit the lowest level since March 2007, meaning some people may be taking on more debt.
“Purchases on personal credit cards increased in May and this trend is likely to continue,” Canstar spokesman Steve Mickenbecker said.
“Consumers have pivoted, in this case to spending online, and we’re expecting spending during the current Sydney lockdown to repeat the pattern.”
Personal credit card debt accruing interest has come down by $3.7 billion compared to a year earlier.
“The heady rate of credit card debt pay-down that we saw as people raided their superannuation balances has not been sustained,” Mr Mickenbecker said.
The level of debt is expected to rise in the coming months as the financial impact of recent lockdowns is felt.
Rate City research director Sally Tindal urged people not to give up on cutting up their credit cards.
“There is a possibility credit card debt might continue to creep up again slightly in the coming months as small business owners and casual workers affected by lockdowns turn to their credit cards to pay the bills,” she said.
One option is to switch the debt to a personal loan, at a lower interest rate.
- By Marion Rae in Canberra; AAP
