Australians are reaching for their credit cards to make ends meet at frightening rates, with experts now ringing alarm bells on personal finances.
Credit card spending has reached record levels as the cost of living crisis hits Australian pockets, with warnings about how people could fall into a debt spiral if they keep using their plastic.
Monthly purchases on credit cards reached a record high of $33.5 billion in January according to data from the Reserve Bank of Australia (RBA). That’s a “whopping” increase of 17 per cent in the past year, representing an extra $4.9 billion on Australian credit card bills.
With one in two Australians experiencing financial stress, there are a growing number of people turning to their credit cards to pay for things they don’t have cash for, according to Finder credit card expert Amy Bradney-George. “As prices continue to rise, consumers are depending on credit cards more – including to pay for essentials like food and utilities.”
Alarmingly, the percentage of people who rely on their credit card to manage their finances has gone up 50 per cent in the past two years. One in four Australians (27 per cent) now say that they can’t manage their finances without one, compared to one in five (18 per cent) in May 2021.
The average spending on a credit card reached $3056 in December 2022, as holiday spending and inflation created the perfect storm for increased spending.
There are concerns that rising use of credit cards could put people at risk of falling into a “debt spiral”, where high interest rates see debt continue to grow despite payments being made.
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