Credit card debts soar for fourth straight month as cost of living expenses accelerate

The Reserve Bank has highlighted yet another sign that Australians are doing it tough as cost of living expenses soar.

Soaring petrol and grocery costs threaten to wipe out the progress Australians have made in cutting their personal debt, with the nation’s credit card bill rising for a fourth straight month to $17.4bn.

New data from the Reserve Bank on Thursday showed the national credit card debt rose by another $51m in February, having grown by $148.7m in January and $290m in December, a pattern financial analysts say is a red flag that people are doing it tough.

RateCity.com.au research director Sally Tindall said the amount of credit card debt held by Australians had eased until late 2021 when simmering inflationary pressures began to boil.

“Australians made huge headway into credit card debt over the last two years. It’s agonising to see some of that hard work come undone,” she said.

The number of personal credit card accounts in Australia remained relatively steady at 12.4 million in February, but the value of transactions surged by 2.4 per cent to $21.58bn.

The balance accruing interest is at $17.44bn, down from $19.7bn a year ago but now higher for a fourth month.

Ms Tindall said soaring prices – exacerbated by the summer Covid-19 Omicron outbreak and war in Ukraine – had clearly put many people in a difficult position.

“You only have to go to the petrol station or the supermarket to know that inflation is on the rise and that’s putting pressure on some family budgets,” she said.

“Families who are struggling to make the monthly budget add up should search high and low for a more permanent solution instead of sticking any excess on the credit card.

“Credit debt accruing interest at a rate of 17 per cent – sometimes even more – is the last thing people need if they’re having trouble keeping on top of the bills.”

Credit card bills had been falling since the onset of the Covid pandemic as consumers tapped into early superannuation release schemes to shore up their immediate finances.

Shoppers more broadly have been moving towards buy now, pay later products for purchases, although many traditional credit card companies now offer this service.

On top of rising household expenses, borrowers have also been saddled with fixed interest rate hikes over the past few months as banks seek to offset higher costs.

The Reserve Bank has also indicated the official cash rate will shift from its current record low 0.1 per cent in the coming months in order to rein in price rises, a move that should again add to mortgage bills.

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