Aussies Carrying Heavy Credit Card Debt

More and more Australians are getting heavily into debt as a record high of $45.4 billion remains unpaid. There are fewer payments made on credit card expenses, which indicates that people spend more than they can afford. This results to an average credit card of $3139 according to the Reserve Bank of Australia.

This new record is a clear indication of how much Australians are relying on credit cards to maintain their lifestyles. This is not at all related to a post-Christmas spending binge so the only rational explanation is that the spending can continue over the next few months while repayments decreases significantly.

Many have speculated that the cutting back of repayments may be partly due to the rising unemployment rates. A looming recession hovers at the horizon. Many can no longer afford to make the necessary payments and are forced to carry the heavy debt. In February alone, a 7.1 % have decided to reduced or stop their repayments.

The new figures come at a surprise especially when consumer spending was relatively weak at the start of this year. Then the Australian credit card debt ballooned by 1.7% setting an all time high record of $45.4 billion. When calculated, this places $3149 average debt for every cardholder. In truth, the latest data collected by the Reserve Bank indicates that the growth rate of credit card debt is showing signs of slowing. However, there is a widening gap between spending and repayments, which is a clear symptom of the present reality that we are entering into a recessionary period.

It has been two months now that repayments have been cut back and there are indications that it will be a continuous trend. Many economists are getting concerned as they see spending slowing down but balances keep on rising. However, some positive news in the figures given by the Reserve Bank is the trend that veers away from cash advances. Interestingly enough, in February, cash advances decreased by 1.8 % to levels that have not been observed since the start of the credit crunch. In fact, it was the 21st consecutive month that the number of cash advances has been significantly reduced from that of the previous month.

To sum up, consumers have spent $17.1 billion using their credit cards in the February figure, which shows a slight increase as compared to the data in January, but it is way below the monthly average for the entire year of 2008.

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