Australian Credit Card Spending: On the Rise in 2009

According to the Daily Telegraph, credit card debt is at a record $45.4 billion dollars. That’s $45,400,000,000. Those are a LOT of zeros! This indicates a balance owing of $3,149 for each Australian card holder. Of course, we all know that there are some who only owe $50, while others owe $50,000.

Credit Card Debt Increasing:

It would be quite foolhardy for people to increase their credit card spending during an economic downturn. However, overspending does not seem to be the case. Statistics from the Reserve Bank of Australia (RBA) note the shift in credit card use between December, 2008 and February, 2009:

• The amount withdrawn in cash advances decreased from over $1 billion to $962 million.
• The amount spent on purchase transactions decreased from nearly $20 billion to just over $16 billion.
• The total balance owing increased from $44.741 billion to $44.799 billion.

So even though it would appear that credit card spending is decreasing, credit card debt is increasing. How can that be?

How Does the Debt Keep Growing?

In addition to the numbers noted above, the RBA states that repayment amounts dropped by more than $46 billion as the calendar pages turned from 2008-2009.

This list of statistics tells us several things:

• Australians are not paying down their credit card debts;

Which means:

• Australians’ credit card debt is accumulating more interest and growing;
• Australians must be using their credit cards in other ways (not cash advances or purchases);

Such as:

• Australians are using their credit cards for daily living expenses like paying bills, or using their cards to stave off other debt collectors.

Unemployment Rising:

The number of skilled job vacancies plummeted by 7.2% in December of 2008, predicting a bleak future for those seeking employment in 2009. The Wall Street Journal reports that the vacancy index – now reported at 62.4% – has decreased by over 37% in just one year.

Plainly stated, if you are looking for work, it will become increasingly more difficult to do so in 2009. With economic troubles come hiring freezes and layoffs, income freezes and even pay drops, and fewer jobs on the market to choose from.

Put it all together.

Families are losing income, whether due to job loss or wage freezes. Families which once had two incomes now have one. Families that had one income may be left with none. When faced with the prospect of not having enough money to meet the monthly budget, what’s a person to do?

Would you use your pay cheque to pay down your credit card or purchase food for your family?

Would you use your cash to pay down your credit card or pay your utility bill?

And what if all the pay cheque is used up, but the mortgage payment hasn’t been covered? Would you use your credit card?

This is likely what’s going on for the average Australian family. In order to stay afloat financially, credit cards are being utilized for household necessities, and balances are left sitting (and growing).

Breaking the Cycle.

If you are stuck using your credit card to pay bills, and your credit card balance is stuck at the maximum, here are three ways to break the cycle.

1. Vow not to use the card anymore. This is easier said than done, but the fact is that continuing to accrue debt will only exacerbate the problem.
2. Look into a consolidation loan or a balance transfer credit card to lower interest rates and payment amounts.
3. Try penny-pinching techniques such as coupon-clipping, meal planning, hanging clothes to dry, turning down the thermostat, using CFLs instead of incandescent lights, cancelling non-essential services like cable or mobile phone, etc.

Check out our comparison tools for balance transfer cards and debt consolidation loans.

Getting through a shaky economy unscathed is next to impossible. You can, however, fight the national trend of increased credit card spending in your own home.

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