Life without credit cards: Aussies consider cutting the plastic

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Credit Card Purchases
A shop assistant uses an eftpos system at a Specialty Fashion Group owned Katies store in Sydney December 11, 2012. Reuters/Tim Wimborne

A new research has found that Aussies are willing to live without their credit cards due to high interest card rates. A finder.com.au survey has found that one in 10 credit card holders are considering cutting up plastic once and for all.

The survey asked 2,004 people, and many said that excessive interest rates would cause them to ditch credit cards, despite rates being at record lows elsewhere in the economy. There are estimated to be about 16.7 million credit cards in Australia today, which means over 1.5 million people may soon stop using them.

The findings of the survey indicate that Australians are fed up. Standard credit card rates remained above 19.5 percent on average since 2011 regardless of the RBA lowering the official cash rate 12 times. From 4.5 percent, it was down to 1.5 percent, finder.com.au spokeswoman Bessie Hassan said stated.

Hassan added that Aussies are getting better at paying off their credit cards. For this, she believes they have to be rewarded with lower interest rates.

Finder.com.au numbers show that median purchase rate is 18.99 percent. Meanwhile, RateCity figures show that just six out of 184 credit cards on the market have a rate under 10 percent. Spokeswoman Sally Tindall said consumers who aren’t happy have other options.

Other options

“Most transaction accounts give you the ability to pay via Visa, MasterCard and PayPal, while some offer functions such as Apple Pay,” Tindall said, according to news.com.au. She went on to explain that the main difference between a credit card and a transaction account today is that the latter draws money from a person’s own funds, rather than his bank. Therefore, it would be harder for one to find himself in debt.

For those who want to ditch their credit cards but have money owing, Tindall recommends transferring the balance owed to a different financial product like a personal loan for relatively lower interest rates. She added that personal loans were good for larger purchases, like home renovation or a new fridge, that would otherwise need a credit card.

“If you know you have trouble paying off debt, avoid the temptation of a zero percent balance transfer card,” Tindall said. She pointed out that shifting from one card to another is rarely the solution, unless a person has read the fine print cautiously and is diligent about paying it off within the specified time frame.

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