New research has revealed that after paying for essential purchases, Aussies are incurring the most credit card debt from travelling.
The research, which was commissioned by Money.com.au and surveyed 732 credit card holders, revealed 19 per cent of Aussies rack up most of their debt on holiday and leisure activities, making it the biggest expense paid for by plastic after essential purchases and bills.
People under 30 are the demographic most likely to incur credit card debt from holidays, with 28 per cent admitting it was a major expenditure, compared to 16 per cent of over-60s and 12 per cent of those in their 40s.
Location-wise, people living in NSW and Victoria were more likely to incur debt on travel than those living in the ACT, who mostly spend their plastic on entertainment and dining.
The survey also found that 38 per cent of those surveyed will still be paying off their purchases from last year by July 2020, and 21 per cent won’t pay off their debt this year at all.
Debt levels were also found to be relatively low, with 39 per cent saying they had accumulated less than $2,000 and 68 per cent said up to $5,000. Just nine per cent had accumulated more than $10,000 in card debt.
Licensed financial advisor and Money.com.au spokesperson Helen Baker said Australia’s pre-COVID-19 credit card habits were already extremely worrying, and reveal the extent in which consumers were struggling with their debt prior to the financial hardships many are now facing.
“The fact that the major category incurring credit card debt for consumers are on essentials – including groceries, insurances, and utilities – tells us two different things,” she said.
“The first is that Aussies are struggling to make ends meet with their own paycheck, so they’re turning to credit to help them get by. This may be why a fifth of Aussies don’t think they’ll be debt-free this year, as they will continue to add to their debt by paying hundreds of dollars of essentials on it each month.
“However, the results could also indicate that a proportion of people had been using their credit cards to accumulate loyalty or frequent flyer points, rather than because of a lack of funds.
“The reason being is that 58 per cent are paying less than $120 a year, or less than $10 a month, on interest. This could suggest that these people are paying the majority of their balance off each month but are making most of their purchases on their card.”
Featured image credit: iStock/martin-dm