You'll Be Paying Off Your Credit Card Until 2056

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.

Images: Images Money.

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!

Save 44 years of interest [SMH]


Comments

    There is no reason to go into Credit Card debit these days.

    Visa/Mastercard Debit cards come from most banks credit unions and just to address a few myths:
    * They offer the exact same level of protection as their credit cousins
    * They can be used everywhere credit cards can, retailers/online stores can't tell the difference.
    * Credit Cards won't help you build a good credit score for a mortgage down the line.

    Also theres Pre-paid cards by the way if your worry about using your own money and don't want to create a seperate account for it or something like that.

    My advice which I am following myself now, ditch the credit card, setup a regular direct debit to pay it off in reasonable time so that when you get paid so you don't have to think about it call it your Stupid Tax for using them in the first place. Debt is dumb.

      With your last dot point. I think it's necessary to have a credit card or multiple PROVIDED you are responsible enough to NEVER carry a balance. Constant perfect repayments give you a much better credit score for your mortgage than if you were given the default interest rate because you never had a credit card.

      Incorrect.

      Some companies like Woolworths do not treat debit cards the same as credit cards, and they can tell the difference. The issue is not that you can't use funds, its that you don't have VISA/MasterCard scheme protection like you would with a credit card.

      http://www.lifehacker.com.au/2010/05/woolworths-debit-cards-policy-causing-confusion/

        I don't agree. I am 22, have a fairly ordinary full time job, and a car loan. Never had a credit card, and late last year I was approved for a home loan.
        All you need is a good savings history.

    I used to work in a government Financial Counselling department helping people with debt.

    The biggest problems that got people in debt were Credit Cards and Payday lenders (short term, unsecured loans).

    The best recommendation I can give to people is live within your means.

    Getting a higher home loan or more expensive rent can cause lots of troubles down the line, and by the time they go to a Financial Counsellor it's too late to do much and they get into poverty.

    If you want something that you are going to be paying for, for quite some time, do your budget based on that first and make sure you make allowances for unplanned events/emergencies.

    Why is it that even our governments,cities,townships ect. are so bad into debt also...everyone seems to be doomed.
    These are "The End Days!"

    Six years ago I dumped all my credit cards and started using a debit card. Best move I have ever made.

    I use a credit card as a financial instrument. it allows me to sit my money in an offset account against my home loan for longer saving me money. this works well as the cc is "free" with my home loan and I pay it off without incurring interest.

    As long as you work smartly with them all is fine.

      +1

        If you c an't negotiate price and aren't charged extra for using a credit card, then you should always use your credit card.
        You get reward points and the benefit of having your money earn interest or saving interest. Just use your credit card as if it is a debit card. You don't have money in the bank don't buy anything on credit card.

    i never understood why my bank encouraged me to get a credit card..I'm fine with using my Debit Card. Never had a credit card. I've always have money to buy what i want. Although 28 degrees is what im looking forward to.

    i have a $100K plus job and have never had a credit card with a limit more than $500. best decision i have ever made, i can still go on holiday and put a few grand on the card and use it but i never, ever get more than $500 in debt.

    *contented sigh*
    i paid my cc off in january

    Some people must have scarily huge balances. I've had a CC for over 20 years and haven't paid interest once. It's paid every fortnight, because I mostly use it for things I had to buy anyway.

    I haven't had a credit card for almost 8 years, but just signed up for one because it's near-impossible to hire a car without one. Some car-hire companies don't accept debit cards at all, and others place a hold on the full excess amount plus more for several weeks after the hire, which is a massive PITA.

      Yes! And if you're using your credit debit card to pay for something expensive, say a holiday, you hit daily transaction limits much lower than you do with a credit card. Discovered this one recently.

      I pay my CC off in full every month but use it because I like the reward points and the safety net if I ever had insufficient cash in an emergency.

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