More Australians are getting their hands on a credit card to open a door that leads to convenience and managing their expenses and debt better. Almost half of the Australian population has opened up a credit card account in the past few years to help them better manage their financial obligation, but this has also opened a can of worms when it comes to the ever-growing credit card fees and debt.
More Australians are taking out credit cards
The number of Australians lining their wallets with a shiny piece of plastic has increased, but so has the nations financial woes when it comes to staying on top of credit card debt. A recent report on credit card use released by ASIC revealed that the number of new credit card accounts has increased to just over 300,000 since July 2012.
However, the research also revealed that the power of convenience that comes with a credit card has also increased the number of Aussies that fall into the debt trap. Outstanding balances owed on credit cards has reached an all time high as it currently sits at almost $45 billion.
Although there has been a decline in the amount of interest that is owed on cards which fell from $33 billion to 31.7 billion, Aussies could face some troubled times ahead due to choosing the wrong card that comes with high fees.
Do you know if you have the right card?
The market is currently flooded with a wide range of credit cards that offer tempting promises to Australian consumers such as 0% to low interest rate, rewards and features such as travel insurance and more. However, some consumers end up selecting a card based on its features and end up choosing a card that is not suited for them in the long run.
The lack of comparing credit card fees has led to consumers being charged high fees that sees an increasing number of Australians missing the credit card monthly repayments. According to the research, Australians had to fork out approximately $1.5 billion in fees over the previous year. These fees included annual fees, late payment fees and other fees that came with the use of a credit card.
Could we be heading for a credit card debt crisis?
More consumers are finding themselves trying to find ways to manage debt that has accumulated from their credit cards due to having the wrong card for them. The number of people that had delinquencies became increasingly high among young people who owned multiple credit cards. 178,000 people were in severe delinquency, almost 370,000 additional people were in serious delinquency, and 930,000 had persistent debt.
Not knowing how to compare the right card can cause negative effects
Consumers who are most likely to choose the wrong card that could cause them to accumulate more debt is due to the lack of knowledge on how to go about choosing the right card that is suited towards their financial situation.
A lot of people are fixated on the interest rate when it comes to having a credit card, but they tend to overlook the fees that come with having the card. Having a low rate card can be the most beneficial as this could have helped Aussies reduce the amount they owe on credit card interest by $621.5 million if their card had an interest rate of 13%.
But the annual fees are just as important when comparing cards. Check to see if your credit card comes with other fees and charges to see if it is still within your financial reach. Try to avoid cards that come with features that you are not likely to use, and if you have a reward card keep in mind that the more features you add to it the higher your annual fees will be.