Australians have spent a record-high amount using credit cards despite the pandemic and a higher cost of living.
Evidence in Finder's Credit Card Report 2024, which combines aggregate credit card data from the Reserve Bank of Australia (RBA) with data from Finder's Consumer Sentiment Tracker (CST), suggests people are turning to plastic to cover the rising costs.
Spending on plastic totalled an all-time high of $35.3 billion in January 2024, which followed a significant downturn in credit card use between May 2017 and April 2022.
The data found about 2.2 million people - a fifth of Australian credit card users - changed their limit in the past 12 months. One in 20 upped their limit because they struggled with the rising costs, and four per cent of people did so to afford a more expensive lifestyle.
Just three per cent of people reduced their credit card limit to reduce temptation or improve their chance of getting a home loan.
Despite the increase in spending limits and overall value of transactions made, many are missing their repayments or getting caught out before pay day.
About 1.75 million people, or one in eight credit card holders, missed a payment in the past three months. Also, a fifth of cardholders bailed themselves out of an emergency expense by reaching for the card.
Nearly one in 10, or about 746,000 people, used a credit card after running out of money before pay day, putting them at risk of going into debt because they've run out of money before their next pay.
Rewards cards were also problematic for some; Nearly half of credit card holders (46 per cent) who collect rewards points struggle to satisfy minimum spend requirements. But one in eight said they met the spending requirement stipulated by a rewards credit card but ended up in debt.
Graham Cooke, head of consumer research at Finder, said credit card transactions bounced back dramatically from the impact of COVID-19, and the cost-of-living crisis pushed spending up "well beyond where it should have been".
His advice was simple: "Aussies should be careful to keep track of spending on plastic and pay it off in full every month to avoid interest charges."
He acknowledged the rising cost of living is starting to cause long-term damage to people's finances.
"Ideally, you want to pay off the total amount you owe each time you get a statement," he said.
"If money is tight, you also have the option of paying just the minimum amount listed on your statement. As long as you pay that by the due date, you can avoid late payment fees. But the more you can pay off the balance, the better."
To read the full report, visit https://www.finder.com.au/credit-cards/credit-card-report
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