Almost two-thirds of Aussies are depending on credit cards to pay household bills and struggling with the debt. How can you better handle your monthly expenses?
It’s no secret that many Aussies struggle to pay their bills each month, and a recent finder.com.au survey has revealed that 66% of card holders use their credit card to pay their monthly bills. This data comes as the national credit card swells to $51.9 billion in February 2016 up from $50.9 billion the month before according to the Reserve Bank of Australia. This matches up, with one in four Aussies credit card holders unable to repay their balance in full each month. While the majority (77%) are able to clean up their debts each month, this means a large portion of Australian families are left with credit card debt from their utilities and insurance bills.
Overall, the survey found that males were more likely than women to pull out their plastic to pay for bills. On a statewide level, card holders in NSW (30%) were most likely to pay for bills on credit, shortly followed by Victoria (25%) and Queensland (22%). It also turns out that the older you are, the more likely you are to depend on your card to cover bills with baby boomers (46%) the most likely to pay for household bills with a credit card, followed by Generation X (46%).
Worryingly, almost half (47%) of households in the lowest income bracket (under $50,000) are leaning on their credit card to pair their household bills. As these costs can be hundreds or even thousands of dollars, unprepared and low-income households are likely to carry the burden of these debts for many years to come.
So why are we using our credit cards to pay the bills? While some participants admitted to using their card for rewards to pick up rewards points or to help with budgeting, others admitted it was the only way to keep their services connected.
If you are considering using your credit card to pay the bills, there are a few alternatives you might like to consider to either get more for your money or to avoid the debt that comes with charging your bills to your card.
How could we use a credit card to pay household bills?
If you struggle to repay the debt from your household bills, you might want to consider an alternative to a credit card such as a debit card. However, if you are going to use a credit card, there are a few factors you should consider to get the most out of your spending.
If you have a rewards credit card, paying your bills on plastic could be a clever way to pick up points on necessary costs. While most providers, including the Big Four, consider bills and utilities eligible purchases, there are some restrictions. For example, if you pay your bill via BPAY or over the counter at a bank, you might not accrue points. Some bills, such as phone bills and tax payments, aren’t considered purchases by the phone or insurance provider, so it’s important to confirm this before you start flashing your card every time you pay a bill.
Compare the top* rewards credit cards
If you’re using your credit card regularly to pay your household bills, you’ll want to make sure you’re not paying too much interest. The higher the interest rate, the harder it will be to repay your balance and the easier it is to fall into debt. In this case, look for a credit card with a 0% purchase rate for a promotional period. Keep in mind that this low rate will revert to the standard purchase rate when the offer ends, so it’s important to know what this rate is so you’re not caught out. If you don’t struggle to repay your debt each month, you might want to consider a card with an ongoing interest-free days offer.
Compare the top* 0% purchase credit cards
*Sort the table by the purchase rate to see the cards with the lowest and longest 0% purchase offerBack to top
0% balance transfers
If you’re already dependent on your credit card to pay your household bills but are struggling to repay your debt, a balance transfer credit card might be the next step. If the card comes with a 0% or low balance transfer offer, you’ll be able to repay your balance without accruing any interest. These cards shouldn’t be used for purchases at the same time, though, so this card should be reserved for consolidating your debt rather than paying your bills.
Compare the top* 0% balance transfer credit cards
Rates last updated October 1st, 2016.
- St.George Vertigo Visa
Balance transfer and purchase offer have been extended until 4 January 2017.
September 30th, 2016
- Bank of Melbourne Vertigo Visa Credit Card
Intro APR of 1% for 12 months and BT offer of 0% for 18 months extended until 4 January 2017.
September 30th, 2016
- Bank of Melbourne Vertigo Platinum
Balance transfer offer changed from 20 to 18 months, extended until 4 January 2017.
September 30th, 2016
*Sort the table by the balance transfer rate to see the cards with the lowest and longest balance transfer offers
If you do decide to conduct a balance transfer but are unsure how you’ll afford your bills without a credit card, it might be time to tighten your finances. Look over your bank statements and consider your daily expenses to determine where you can cut back. Otherwise, it might be an idea to contact your provider to enquire about an extension rather than getting into debt with your bank.
Note: statistics correct as of May 2016.