In the late part of the 20th century,credit cards were an essential part of everyday life. It took until well into the 2000s for debit cards to gain traction,and only in 2017 did the value of debit card transactions overtake personal credit card spending.
Young Australians are turning back to credit cards,but they’re not always a good idea.Aresna Villanueva
There are still some 13 million credit cards in circulation,and if you’re part of the Gen X/Boomer crowd,there’s a good chance you still rely on your credit card to manage month-to-month finances.
Among younger Australians,credit cards have remained unpopular,largely due to perceptions they are costly or unnecessary,and the rise of more convenient credit options such as Afterpay. I count myself as among those reluctant to get a credit card,though I do know a number of people who use them regularly. Horses for courses,I suppose. The pandemic also had an impact on their popularity,as people saved more and reduced debt,aided in part by reams of government stimulus.
What’s the problem?
Credit cards are back,baby. Recent data from credit bureau Equifax shows applications for credit cards rose by and according to the Reserve Bank,spending on credit cards for January was up 17 per cent - or $4.9 billion - on the year prior.
Broadly,this increase has been pinned on the current cost of living crisis,with rising interest rates and inflation prompting shoppers to take on debt as a way to deal with higher costs. According to comparison website Finder,the average amount owed on credit cards is just shy of $3000,with most shoppers taking over six months to pay off this debt.
In the world of finance,there’s both “good” and “bad” debt,with credit cards falling firmly into the “bad” bucket due to their high interest rates and (often) low minimum repayments. But just because the debt is bad,that doesn’t mean credit cards themselves are inherently bad. This begs the question:
Should you get a credit card?
There are myriad factors that can go into deciding if you want or need a credit card,and,obviously,everyone’s situation is different. But if you’re tossing it up,here are a few things to think through.
It’s important to think carefully before taking on any unnecessary debt,so the bottom line is to only get a credit card if you can afford to repay it. If you find yourself in more debt than you can deal with,chat with your provider,or call the on 1800 007 007.