Credit Card Solution

With homeowners being burdened with some of the highest mortgage interest rates ever seen, and with many of them having to cope with monthly housing expenses that exceed their income capabilities, it is not surprising that Australians are trending towards conservative credit card spending. In particular, 35% of the citizens of Western Australia have a savings account with a zero balance and are currently paying mortgage payments that are less than ideal for their income.

The high mortgage rates are not the only contributing factor, as the cost of food and energy has also increased, causing many Australians to reconsider their personal finances. As citizens begin to realize the advantages of frugal living, safe investing, and minimising debt, the economy is gradually improving. Recent studies have also shown that debit card usage has nearly surpassed credit card usage, and the newly introduced travel credit cards, which help travellers save by avoiding foreign exchange fluctuations, are becoming popular payment instruments.

Another factor that is contributing to the decline in credit card spending is the fact that credit card interest rates are also at an all-time high, and with the recent and projected banking reforms, Australian financial institutions are finding new ways to charge fees and recuperate profits using credit cards. In addition, many rewards programs have been eliminated, causing a lot of cardholders to simply close or abandon their accounts altogether. Cardholders should, however, examine their current utilisation rate or debt-to-credit ratio before closing any accounts abruptly, as it could have a negative effect on the credit score.

While, in the long-term, this new conservative spending trend will ultimately benefit citizens by allowing them to save money, rather than spending it on unnecessary debts, it is also decreasing bank profits. Nonetheless, the Australian financial sector is still considered by many to be amongst the most reliable and stable in the world, and banks are doing a sufficient job of recuperating profits and covering funding costs by charging higher interest on new home loans.

For those who have not yet reduced their credit card spending habits and are trying to cope with mounds of credit card debt, advisers recommend retaining twice the minimum amount due each month, ensuring that all payments are issued on time, and utilising balance transfer cards to consolidate and repay debts at a 0% APR interest rate.

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