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7 Mar, 2012

Australia Launches Debt Clock to Help Cut Credit Card Bills

5 March 2012 – The Australian Securities and Investments Commission (ASIC) today announced its MoneySmart website has a new debt clock that shows the credit card debt in Australia. Check out the clock here.

Australians have over $36 billion owing on credit cards where interest is being charged, an average of $4,700 per card holder. Credit card debt peaks in the first quarter of each year after Christmas spending.(1)

MoneySmart’s Delia Rickard said, ‘People don’t always see paying off their credit card debt as a priority. In fact, paying off your credit card debt should be a top priority for millions of Australians. Pay off as much as you can afford, as quickly as possible.

‘If you have $4,700 credit card debt (the national average) and only make the minimum repayments, it will take 49 years to pay it off and cost you around $14,600 in interest. But if you are able to pay off $250 each month, you’d pay off your debt in two years and save $13,700 in interest.(2)

‘At a typical interest rate of 15 to 20% the average person is paying around $800 in interest per year, much more than that for some people. Ms Rickard said, ‘There are a million things you’d rather spend $800 on than credit card interest. Start working off the interest now so you can spend that unseen money on things you really want.

‘I encourage everyone with credit card debt to go to the MoneySmart credit card calculator and see how much money they can save by paying off more than the bare minimum’, Ms Rickard said.

MoneySmart’s top tips for paying off your credit card debt:

  • Stop adding more debt to your credit card.
  • Pay more than the minimum repayment – even an extra $50 per month will make a big difference.
  • Set up a direct debit to pay a fixed amount off your credit card balance each payday.
  • If you have more than one card, pay off the card with the highest interest rate first.

Ms Rickard said, ‘If you’ve got multiple credit cards, once you pay them off only keep the cheapest one – the one with the lowest interest rate or fees. Be sure to cancel your credit cards properly by informing your bank because if you just cut it up and don’t tell your bank you may still need to pay fees.

‘Once you’ve paid off your credit card, consider only using it for emergencies. Also, consider using a debit card for online purchases instead of a credit card so that you’re buying things with money you already have’.

Notes:

1. Based on Reserve bank of Australia figures.

2. Calculated using the MoneySmart credit card calculator, with an interest rate of 18.5% and 2% minimum repayment