Australian Personal debt spikes with higher interest rates

Now, more than ever, Australians are turning to their credit cards to purchase items and services that they do not have the cash to meet. Ironically, purchasing non-essentials on credit can actually be understood as bad credit debt, which is what consumers must avoid.

Recent research describes how Australians hold over $1 trillion dollars’ worth of debt, which is, of course, a very substantial amount. Whilst spending may be a joyous and enthralling experience, high interest repayments are the opposite. One of the worst outcomes that a consumer can face is the difficult scenario of making repayments for a purchase which was made a number of months ago, and which no longer seems like value for money. For example a $50 pair of trainers may seem like a great deal at the time, however, after 5 months or so of repayments the shoes may no longer seem so attractive.

Monthly minimum repayments can also be a thorn in the side of card users. By making only the minimum monthly repayments, users only pay the interest charges, and consequently the principal remains intact with users continuing to make payments.  Credit card users must be sure to pay off their credit card debt as soon as possible to avoid further interest charges.

The higher debt of Australians can also be attributed to interest rates, rather than simply indulgent spending being to blame. Unlike Americans, Australians are paying relatively high interest rates on their debt.  The Australian Central Bank has been quicker to raise their rates than their counterparts in the USA and in Europe.

Consumers with multiple credit cards should choose to pay off the card with the highest rate first. In cases like this, they should make every day purchases in cash or by using a debit card.

As interest rates increase throughout the market, consumers must work a little harder, and research a little longer to find the better, lower interest rate offers. Lower rates result in lower debt levels for the cardholder.