Many will struggle to pay off their balances with three in four
paying more than 16 per cent interest according to Aussie study
The majority of Australians with credit cards will spend the first three months of 2010 paying off their spending, which averaged more than $1,000 during the 2009-2010 festive and holiday season and now totals a balance of more than $3,200.
According to an exclusive national study commissioned by Aussie, half of all respondents admitted they had accrued one-third or more of their current debt over Christmas alone. The study also revealed 29.1 per cent said they spent up to $2,500, and 19.9 per cent spent between $2,500 and $10,000 over the holiday period.
And the majority of respondents were paying high levels of interest with more than half paying 16 to 20 per cent on their purchases, with high annual fees on top.
Aussie founder and executive chairman Mr John Symond said this level of credit card debt could be crippling for many Australian families.
“These high levels of debt racked up over the silly season can spell a hell of a financial hangover for the New Year,” Mr Symond said.
“It will take a huge effort for some people to pay off their credit card balances, especially when interest rates on some cards on the market are at very high levels, and are likely to keep rising this year given the Reserve Bank’s indications it will continue to lift the official interest rate as the Australian economy improves.”
The research showed 78.5 per cent of respondents believed it would only take three months to pay off their balances, with 9.7 per cent estimating three to six months and 11.8 per cent believing they would not clear their balance until the second half of the year.
While overall, three-quarters of respondents said they believed it would not be “very hard” to pay off their debt, women demonstrated greater debt stress than their male counterparts.
One in three women thought the debt would be “somewhat hard to very hard” to pay off, with 34.2 per cent saying they will have to “go without” in order to clear the balance.
“I admire people’s confidence in believing they can clear their balances in three months, however for many this will be difficult,” Mr Symond said.
“Take an average $3,200 balance with a 20 per cent interest rate and you’re looking at a monthly repayment of $1,102, or more than $246 per week to clear the debt by Easter,” he said. “And that’s provided you started paying it back at the beginning of January, rather than racking up more debt during the Boxing Day sales.”
Mr Symond said a smarter option would be to move the outstanding debt into a low rate card such as the Aussie MasterCard®.
“If you transfer an average balance of $3,200 to an Aussie MasterCard you could save $244 over six months with our 2.99 per cent per annum on balance transfers and purchases for first six months offer,” he said.*
“It makes absolutely no sense to keep paying high rates of interest on credit cards when there are so many great low rate cards.”
Call the Aussie Contact Centre on 13 13 77 to apply for an Aussie MasterCard or go to www.aussie.com.au to apply online.