One in two Australians are struggling with credit card debt.
An Australian Senate inquiry* is soon meeting to address some of thorny questions many Australians are asking about credit cards – like why some cards are still charging interest topping 20 per cent at a time when the Reserve Bank’s official cash rate is just 2.0 per cent.
The inquiry couldn’t have come at a better time. Research by ME shows one in two credit card holders are stuck in a ‘credit card roundabout’, unable to pay off the outstanding balance each month.
Urgent action is essential
While the Senate inquiry may result in changes to credit card offerings, it’s a process that will take time. Anyone struggling with card debt to take action now.
It pays to look closely at the fees and charges on your card. Expensive annual card fees and hidden costs like a higher rate or fees associated with cash advances are easily overlooked. Yet with a range of credit cards available that charge zero annual fees coupled with a single low rate, this is an opportunity to reduce your costs.
Swing the pendulum in your favour
Credit cards are a great cash management tool, but ideally you should be paying them off each month. Ultimately, getting – and staying – out of trouble with credit cards calls for a rethink of household money management. A sensible starting point is drawing up a budget and setting up good processes to stay on track. Arranging automatic transfers can ensure you are consistently setting some money aside for saving. With a pool of cash to fall back on, chances are you won’t need to resort to a credit card when bills arrive, and the financial pendulum can start to swing in your favour.
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