Australians Swipe Big: Credit Card Spending Hits Record AU$28.1 Billion Over Christmas

The Reserve Bank of Australia (RBA) has revealed that credit card transactions of Australians reached a record high of AU$28.1 billion during the Christmas season, with AU$17.8 billion now being charged interest.

This huge amount of credit card debt has left many households struggling to pay off their growing bills. In total, credit and debit card spending for December exceeded AU$80 billion, marking an increase of AU$882.5 million compared to November, News.com reported.

An analysis of RBA data by Canstar shows that credit card debt attracting interest increased by over AU$236 million, compared to the previous month, and by more than AU$500 million from the same time last year.

Many Australians use credit cards to earn loyalty points and rewards, but those who carry unpaid debt will have to pay very high interest rates.

Canstar's data insight director, Sally Tindall, explained that this rise in credit card debt with interest charges was driven by pre-Christmas spending, especially during a cost-of-living crisis.

"With the value of credit card transactions also hitting a record high in December, the national addiction to credit card debt is likely to get worse, before it gets better," Tindall said, News AU reported. "If you have dug yourself into a credit card hole, it's worth getting on to it quickly."

"One of the first things to do is try and go cold turkey so you're not adding to the debt. If that means taking the scissors to the card, then so be it."

Managing and avoiding the debt

Tindall advised that anyone struggling with credit card debt should create a repayment plan.

For those who find it difficult to control their spending, she suggested switching to a personal loan instead of relying on a credit card, as this would require them to pay off the debt within a fixed time, without adding more to it.

She also mentioned that customers could switch to a lower interest rate credit card, as nine providers currently offer options with purchase rates below 10%. Another option for managing credit card debt is switching to a 0% balance transfer credit card.

These cards allow users to pay off existing debt without interest for up to 30 months, providing extra time to regain financial stability. While balance transfer offers may seem like a great solution, they often come with hidden conditions, she added.

If customers don't carefully read the terms or fail to repay the full debt within the interest-free period, they could end up in an even worse financial situation.