Over one-third of Australians have overspent on credit cards or been tempted to by lenders offering easy credit enticements, according to new research.
A new Galaxy Research survey of 1,006 people nationwide conducted on behalf of debt solutions company Fox Symes found over one-third (37 per cent) or the equivalent of 6.9 million Australians have blown out their budgets, or wanted to, most commonly due to their credit card provider offering to increase their card limit (16 per cent or 2.9 million people).
A further 10 per cent say they’ve overspent on credit cards so they can rack up bonus points on their cards for flights and gifts. This is despite the fact that a spend of many thousands of dollars is usually needed to redeem anything worthwhile.
According to Finder.com.au there are currently more than 16 million credit cards in operation in Australia, with collective debt of more than $32 billion. Some 11 per cent ($2.1 million) feel the sheer ease of getting a credit card in the first place places them in a precarious position. Finder said more industry research shows almost a quarter of members (23 per cent) had ditched their loyalty program in 2016 with more than half (51 per cent) of those leaving because of earning meagre rewards. In fact, Australian loyalty members spend up to 40 per cent more in store than non-members. According to the research, in 2016 82 per cent of Australians over 18 are enrolled in at least one loyalty program – that’s 14.9 million people. Only half (54 per cent) of members believe they are taking advantage of their loyalty program benefits. Nearly a third (31 per cent) believe they are not.
The Galaxy poll found the relatively simple process of obtaining additional credit cards (9 per cent), along with the convenience of merely maintaining a minimum monthly balance to keep a card going (10 per cent), plus ongoing offers in the mail for new cards (6 per cent), are all strong incentives to keep spending more.
“Of course the problem is that eventually those items bought with credit have to be paid for and if you don’t have the cash, you could be in trouble,” said Deborah Southon, director, Fox Symes.
“People often ignore the fact that when they buy something on credit they may be spending money they don’t have and this could lead to a situation where the debt becomes unmanageable.”
Southon said some of the onus for people’s reckless spending is on the lenders. “If someone is already in debt, and I mean consumer debt, then clearly they are spending more than they earn. To offer people access to more credit when they can’t manage their existing debt is careless and reckless and only worsens an already bad situation.”
Younger people say they are more susceptible to temptation with 42 per cent of Gen Y polled and 48 per cent of Gen X admitting to misusing credit compared to Baby Boomers (31 per cent) and Traditionalists aged 50 plus (23 per cent).
“When we are young we often don’t think about the future and nor do we consider how the consequences of what we do now will affect us later,” said Southon.
“Not all young people understand that building strong financial foundations based on financial discipline and restraint from an early age is the key to financial freedom and wealth.”
The research found men are more regularly tempted by the lure of easy credit cards. Some 41 per cent of males compared to 34 per cent of women (34 per cent) have spent up big, or been tempted to do so, due to the offer of increasing limits (19 per cent compared to 13 per cent), and the ease of taking out multiple or additional cards (11 per cent compared to 6 per cent).
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