Common Pitfalls Around Credit Card Debt

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As more Australians use their credit cards for spending, the national credit card debt has topped $17 billion.

While many have been able to save money during the pandemic, the latest credit card numbers indicate that there are still plenty of people in debt.

So what are the pitfalls people can fall into when spending on credit?

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Increase in credit card debt
(Today)

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Today, finance expert Effie Zahos called it ‘heavy debt that people can’t pay off’ and things like cash advances have also risen slightly as the cost of living has risen.

“Watch the market buy now, pay later. Global data shows After-payment and Klarna doubled the usage,” Effie told Today.

“And when you looked After-payment profits, they showed losses because people don’t repay loans. It’s a concern.”

Increase in credit card debt
(Today)

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With more and more zero-balance transfer cards hitting the market, Effie said there are some things to watch out for.

“Coles, for example, has one — 36 months interest free and an annual fee of about $58,” she said.

“There’s no balance transfer fee. You think that’s great, but when it comes to these cards, watch out for the balance transfer fee. It’s a real killer.

She also said to keep an eye on the return rate, which is the interest rate your card switches to after the introductory period expires.

“What bothers me is that they have transfer limits. They will only take on part of your debt, not all of it. Then you’ll be stuck with two cards.”

Watch the full Your Money segment above

The information provided on this website is of a general nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website, you should consider the suitability of the information to your objectives, financial situation and needs.

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