- 23 February, 2016
Credit card debt: A cancer eating away at our society
I just received my credit card statement from one of our big banks. The fine print on the statement, which I would guess few of us read, suggested that if I dutifully pay the minimum monthly amount, and don’t put any other charges on my card (they didn’t actually say that, but I am smart enough to read between the lines!) then I would have my $3,736.34 balance paid off in “about 54 years and 11 months”.
That, dear readers, is somewhere around Christmas 2071, at which time I will have just celebrated my 122nd birthday. I will also have paid an estimated $23,166.05 in interest.
Credit cards are wonderfully convenient. They allow us to buy what we want, when we want, and without huge regard for how we are going to actually pay for it.
In the “good old days” you had to wait until you had the money before buying new clothes, the latest fashion accessories, electronic gadgets, or most other things for that matter. But now? Instant gratification at the swipe of an 85 x 55 mm piece of plastic.
Please don’t get me wrong, credit cards can be a very useful accessory but like fire, they are a wonderful servant but a terrible master.
Last week, I was looking at the ASIC’s Moneysmart website. It has a counter that tracks credit card debt. When I looked at the counter, the total outstanding credit card debt in Australia stood at just over $32 billion. The interest component alone was $5.4 billion. That is the equivalent of an outstanding balance of $4,383 on each and every credit card on issue in Australia.
Incidentally, I looked at the ASIC “counter” 12 hours later and total credit card debt had increased by $3.5m over night. Must have been a big night on the town somewhere!
No wonder the banks and merchants are so keen on issuing credit cards, and increasing credit limits wherever they can. This is easy money for them. And remember, they don’t want you to pay off the full balance of your account. Just pay the minimum each month…..that will be fine!
If we are to generate real wealth, we need to tackle our credit card debt as a matter of priority. Increasing credit card debt, and associated interest payments are a cancer that is eating away at our society. We must “save our way” out of the poverty trap that big business has set for us.
The level of credit card debt is sickening and so many young people, families and older Australians are being inflicted by stress that comes from insurmountable debt. Somehow, we have to rise to the challenge and overcome this burden. It is the only way we can hope to enjoy some level of financial freedom and not be celebrating our 122nd birthday knowing that we have just cleared our credit card debt.
In a future blog I will provide some simple strategies for getting rid of the credit card debt once and for all.
Oh, and by the way, my very helpful bank suggested that if I paid $192.25 per month off my credit card each month, instead of the minimum, I will have it paid off in just 2 years, thereby saving myself $22,281.58 in interest.
The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here