Warning to shoppers shifting away from cash

You could be one of the cash-strapped Australians racking up a huge credit card bill because you’re struggling to buy

You could be one of the cash-strapped Australians racking up a huge credit card bill because you’re struggling to buy groceries and pay bills with cash.

According to new figures released by finder.com.au, which surveyed more than 2,000 Australians, at least 25 per cent of all credit card spending is made by credit card while a further 16 per cent use the card to pay their bills and at lest 10 per cent indulge in entertainment with the card instead of cash.

While it might not be uncommon to use your credit card for such things, with Australia’s credit card bill sitting at a jaw-dropping $51.3 billion it is of concern because it means you aren’t always clearing that credit card debt at the end of each month… And before you know it you could be up to your eyeballs in it.

Consumer finance expert Lisa Montogmery told The Daily Telegraph that paying with plastic makes it more difficult to monitor your spending habits.

“Consumers have made almost a full transition to cashless transactions and this has naturally included the weekly grocery bill,” Montgomery says. “The downside of this is that when you spend on a card, it’s easy to overspend as you are not limited by a cash amount in your wallet.”

Back in September, the ABC highlighted that credit card bankruptcies could be the next big banking scandal.

Many credit cards have an interest rate of around 17 per cent (or more), which means if you are unable to wipe the debt off your card at the end of each month you are unlikely to escape those nasty interest charges.

According to finder.com.au spokesperson Bessie Hassan, “The average Australian credit card has $3,095 in credit card debt, 63 per cent of which is burdened with accruing interest.”

Do you prefer to use cash or credit when doing your shopping? Are you able to clear any credit card debt in full at the end of the month? Do you have any tips that can reduce your way of spending on credit cards?

  1. Geoff  

    You don’t have to pay off your credit card balance in full to avoid paying interest and fees, you need to pay off the closing balance which is generated when your CC statement is calculated. Have the credit card payment due date changed to few days after your pay day so you have funds to pay off the closing balance, your bank will do this date change for you over the phone. I use my credit card for everything and pay off the closing balance of my card (or more) every month. I haven’t paid any interest or fees for many years.

  2. Mal  

    I use a credit quite often and at the end of the week pay the owed amount by transferring the amount from my cash account. Never had a debit yet.

    • Leah Jones  

      I buy a fair amount of things from the net – such as exotic spice mixes, seeds, plant cuttings, and ALL my clothes. Some places don’t take PayPay, which is my favourite way of paying for anything from the net, and I have to use my Credit Card. As soon as I’ve payed this way, I put money from my everyday account (which my Pension goes into, etc.) into the Credit Card account. The whole deal costs me nothing in interest. When I shop I use my everyday account, or the cash I take from an ATM machine on the day that I shop. I like to know to the last penny how much money I have. If I don’t, I become absolutely frantic – learned from my Mother who lived through two wars and a Depression. Probably not very good for my mental health, but I’ve built habits that keep me solvent all the time, and which make me feel safe. I have to admit that if I’m out and pay for something with a Credit Card I feel as if I’m getting something for nothing, despite the fact that I totally know different. I’m so glad that I’m careful with my money, for I don’t have very much, but it’s always ENOUGH, anf for that I’m very grateful.

  3. Phyllis Hudson  

    I pay my credit card every month with an automatic direct debit from my savings account. Only once in 17 years there wasn’t enough to pay it, so I paid $8 to withdraw cash on my credit card and deposited it in my savings account (different bank). At least I avoided the $35 overdrawn fee on savings account. Won’t be doing that again though.

  4. Adam  

    Consolidate all your credit card debt into a low interest personal loan. Cancel all your credit cards and get a Visa or Mastercard debit card linked to your savings account. Keep a buffer of a few thousand available and focus on saving money.
    I’ve been debt free now for 5 years and have huge savings.

  5. Des  

    After I receive my statement My bank gives me 14 days to pay, Any large purchase i make is at the start of the new period , this gives me 6 weeks to pay , mean while the money stays in my saving account earning interest .Just make sure you pay by the due date.

  6. Pamela  

    I pay mine off every month. I have both Visa and American Express (on the same account) and also receive reward points from both (more from AmEx).

    I take the reward points in cash to my credit card account.

    The money pays my fees and give me a few dollars extra.

    So, in effect, no fees, they pay me to have it and I have an excellent record of all my spending as I save statements on-line or hard copy.

    Win/win for me!

  7. Mike  

    Apparently, according to the author of this article, credit cards are the only form of cashless card you can pay with.

    Of course there is no such thing as a Visa or Mastercard debit card that uses the funds actually available in your accounts.

    But by all means, please tell us more about how going cashless means racking up massive debt…

    • You can use your Visa or Mastercard credit card to make your purchases direct from your account in most cases. Select the EFTPOS option, select cheque or savings account, input PIN, and the cost of the purchase will go direct to your bank account, not your credt card account. Just be careful of your daily limit in withdrawing cash.

  8. “………at least 25 per cent of all credit card spending is made by credit card…………” ??
    Using a credit card does not translate to debt. We buy almost everything on credit cards and pay it off in full every month. And yes as another reader says there are other forms of cashless transactions which don’t require a credit card.

  9. Ursus Maritimus  

    Your attention is drawn to Charles Dickens character Mr Mickawber’s famous quote: “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
    Quod erat demonstrandum.

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