Australians racked up a record $28bn in personal credit card transactions in December, according to new data, leaving many households unable to clear debts and paying extreme interest charges.
The Reserve Bank statistics, analysed by financial comparisons site Canstar, show that Australians are struggling more than ever before to clear purchases made on credit, amid persistently high living costs.
“Credit card debt accruing interest is on the rise on the back of pre-Christmas spending in a cost-of-living crisis,” said Canstar’s data insights director, Sally Tindall.
“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.”
While some people use credit cards strategically to accrue loyalty points and other rewards, those with outstanding balances at the end of a month can pay interest rates exceeding 20% – plunging them into a cycle of debt.
Credit card debt, which is considered unsecured because it is not tied to an asset, has very high interest rates compared with other lending products like mortgages.
The December credit card statistics, released on Friday, showed that “debt accruing interest” on personal credit cards increased by more than $236m from the previous month to $17.8bn, according to Canstar.
The level of interest-accruing debt has risen by about $526m from a year ago.
Bank data shows customers are also increasingly falling behind on personal loan repayments, which are often unsecured, in another sign of financial stress.
The RBA data paints a sombre picture of a growing number of people unable to clear their debts despite a robust jobs market and easing inflation.
Most economists expect the central bank will cut the official cash rate on 18 February, offering some relief to mortgage holders.
