Credit card warning over ‘incredibly stressful’ Aussie trend amid $3,480 problem: ‘Quickly snowballs’

Millions of Australians aren’t prioritising paying off their credit card debt, and it’s quickly “snowballing” into a much bigger problem. With cost-of-living pressures hitting many people’s wallets, some have relied on credit to get them through until the next paycheque.

But when that pay eventually arrives, 2.2 million credit card holders aren’t racing to pay off their debts, according to Finder. The consumer group’s money expert, Richard Whitten, said this was a quick way to pay “far more” than you originally borrowed.

“This cycle of credit card spending and debt can be incredibly stressful and quickly snowball,” he said.

“Every month you delay paying off your card balance, you are essentially giving more of your hard-earned money to the bank in interest.”

Finder revealed that two out of five people don’t prioritise their credit card bill when it arrives.

Almost one-third (29 per cent) give priority to other expenses first, while more than one in 10 (11 per cent) can’t afford to pay down their credit card at all.

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Whitten said not only can this incur late fees, but it can have long-lasting effects on your credit score and can impact your ability to get personal loans or mortgages in the future.

“If you feel like you are chasing Peter to pay Paul and struggling to get on top of your credit card debts, remember that there is help available,” he said.

“If your debts are snowballing, you can contact the National Debt Helpline for free financial counselling.”

He warned that if you are in this situation, then it’s important to avoid making new purchases with your credit card until you get on top of the debt.

Failing that could see you stuck in the “same debt cycle for years” to come.

“Setting a repayment plan and removing the card from your wallet and phone can help you get on top of it,” he added.

This comes off the back of research released in June, which found that more than one million Aussies had maxed out their available credit and opened a second credit card, with the average balance per consumer now standing at $3,480.

Finder also recently revealed that some Aussies are shifting to buy now, pay later (BNPL) services to access faster credit.

The data found that 16 per cent, or 3.4 million people, have shifted from credit cards and personal loans to BNPL in the last year.

More than one in four (27 per cent) still opt for traditional forms of credit, but these avenues can take some time to get approved.

Whitten said BNPL, on the other hand, can usually be approved much more easily.

“The application process is much simpler and faster… It gives them the immediate gratification of a purchase without the long-term commitment of a credit card,” he said.

Gen Z is leading this BNPL revolution, with 22 per cent of the country’s youngest workers using services like Afterpay, Klarna, and Zip over other forms of credit.

Only 18 per cent of Millennials are in the same boat, as are 16 per cent of Gen X and only 6 per cent of Baby Boomers.

Finder’s research also found that women were more likely to choose this form of credit compared to men.

But Whitten urged Aussies to tread carefully around BNPL.

“While the absence of interest can make it seem ‘cheaper’ than a credit card or a personal loan, it’s important to remember that late fees can quickly accumulate and have long-term financial consequences,” he said.

“Despite its ‘interest-free’ nature, BNPL is still a form of credit, and using it responsibly is now more important than ever.”

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