Paying just the interest on a credit card balance with a rate of 17.73 per cent and a balance of $4757 could see you spending over 40 years in a constant state of debt. The figures, which you may have noticed are quite specific, are based on the average credit card interest rate in Australia, and the country's average credit card debt.
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The latter statistic was released by the Reserve Bank last December, with the maths highlighted in an article published today on the Sydney Morning Herald. By paying the minimum amount on a $4757 balance, you'd be shelling out some $12,400 in interest alone over 44 years.
According to The Australian Securities and Investments Commission (ASIC), NSW spends $2 billion in interest per year, while Victorians cough up $1.5 billion.
It's no secret that credit cards attract extremely high interest rates and as such, should always be paid off as much as possible month to month — if not completely. What these numbers show is that, on average, we're not very good at keeping our debts under control.
I always make it a point to pay off my credit card before doing anything else with my income, though I've heard of people who don't use credit at all, and rely on cash and a debit card to get by. Let us know how you go about managing your debts — if you accrue them at all!