Australians rein in their credit card debt during lockdowns

  • By Zilla Efrat

Savings during lockdowns have helped many Australians improve their finances with national credit card debt falling to its lowest level in almost 18 years.

Retail payments data released by the Reserve Bank of Australia yesterday shows debt accruing interest on personal credit cards is down $9.31 billion from March 2020 to September 2021, to a total of just $17.68 billion – the lowest level since November 2003.

“Australians have paid down more than $9 billion in credit card debt since COVID-19 hit, a drop of over one third,” observes RateCity.com.au research director, Sally Tindall.

“Lockdown living helped many families kick stubborn credit card debt as they channelled money saved from not going out towards improving their financial position.”

“The test will be whether Australians can enjoy a lockdown-free Christmas without falling back into bad credit card habits.”

Tindall adds that the number of accounts keeps on dropping as customers turn their backs on credit cards for good, with many switching to the buy now, pay later market for their credit fix.

“A lot of people are operating under the assumption that buy now, pay later is a comparatively safe form of debt because it doesn’t attract interest,” she says.

“These platforms might be interest-free. However, they often come with hefty late fees and can lead to overspending if people aren’t careful.”