December 24th 2024.
As the holiday season approaches, it's estimated that a whopping $86 billion will be charged to credit cards by Australians – a staggering amount that is enough to bring tears to the eyes. However, experts are warning that if people are unable to pay off their credit card debt, they will be hit with exorbitant interest charges.
December is expected to see the highest credit card spending, with $27.7 billion being charged for Christmas shopping and Boxing Day sales. But the spending doesn't end there – in January, an additional $28.6 billion is expected to be splurged, according to Canstar.com.au.
Unfortunately, this trend of increased credit card debt during the holiday season is nothing new. Analysis of Reserve Bank of Australia figures shows that since 2015, the amount of credit card debt accruing interest has risen every January. This is due to the fact that many Australians struggle to pay off their debt within the interest-free period.
In fact, the latest credit card statistics for October 2024 reveal that Australians are currently paying a whopping $8.8 million in interest charges every day, with a collective credit card debt of $17.45 billion and an average interest rate of 18.51%. And these numbers are only expected to rise in January, as shoppers struggle to pay back their holiday spending, which includes Christmas shopping, Black Friday and Boxing Day sales, and summer vacations.
Sally Tindall, Data Insights Director at Canstar.com.au, warned Australians not to ignore their credit card statements. With an estimated $86 billion being charged to credit cards over November, December, and January combined, this year's holiday season is shaping up to be no different from previous years. However, Tindall stressed that it doesn't have to be this way.
She advised those who are already feeling the strain of credit card debt to take action before it gets out of hand. While it may be tempting to loosen the purse strings after a tough year, starting 2025 with a financial hangover is not ideal. Tindall suggested ways to get back on track, such as removing credit card apps from your phone and locking away the actual card. She also recommended speaking to your bank about reducing the interest rate, and exploring options like personal loans or selling something to pay off the debt.
It's worth noting that most credit cards offer customers a certain number of interest-free days to pay back their purchases, with the exact number varying depending on the card and the customer's billing cycle. While some cards may offer up to 55 days, others may only offer 44 or 45 days for customers using a big four bank rewards card.
If you find yourself struggling to manage your credit card debt, it's important to seek professional advice. The National Debt Helpline (1800 007 007) is a great resource for those in need of assistance. As the holiday season approaches, let's all be mindful of our spending and avoid starting the new year with a financial burden that could last for months, or even years.
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