Paying by credit card can be more convenient than paying with cash but while the little plastic card saves room in your pocket, your bank account might be suffering. One of the major downfalls of a credit card is that it can tempt people to spend more than their budget allows, and this can lead to credit card holders owing significant debts that they may have difficulty paying.
In January 2012, Australian outstanding credit card debt amounted to a record high of $50 billion and $36.3 billion of the total is accruing interesti. The average debt per card is about $3333i. But this still hasn't deterred credit card users with over 15 million people using credit cards in their daily livesi. In 2011, the UK-based Economist Intelligence Unit ranked four of Australia's six capital cities in the fifteen most expensive cities in the world to live inii. With rising costs of living, it's no wonder that more and more households are facing debts on their credit cardsiii.
Find it hard to get by without a credit card? To alleviate the burden that comes with owning one, you should keep the following tips in mind:
- Avoid spending more without first paying off any outstanding balance from the previous term.
- Make sure you keep check of your spending patterns - this will leave you in control of your finances.
- Be aware of the fees and interest rates that are imposed - they can jack up your debtiv.
The rising cost of living
Between 2009 and 2010 the Household Expenditure Survey (HES) showed that an average Australian household spends $1,236 per week on goods and services - $64,272 per year - which was a 38% increase from 6 years priorv. The majority of these costs were attributed to the rising cost of housing and rent, food and education feesv. Maintaining a household is no easy task and without monitoring your budget, you could be spending a lot more than you can afford!
Why you need Life insurance
As lifestyle expenses continue to rise, spending beyond budget on a credit card can only add to life's stresses. Outstanding debts can become a considerable burden on your loved ones in the event that you become critically ill or pass away. In the event of those types of circumstances, having adequate insurance in place can help to ease this burden by providing funds to pay debts, and cover the ongoing cost of living.
Get a life insurance quote online from Allianz today and take the first step towards safeguarding your family's finances.
i Yeates, C., 2012, Plastic Debt Swells to Record $50 Billion, smh.com.au, http://www.smh.com.au/money/borrowing/plastic-debt-swells-to-record-50-billion-20120112-1px49.html
ii Main, A., 2011, High dollar pushes relative cost of living in Australian cities up world rankings, The Australian, http://www.theaustralian.com.au/business/economics/high-dollar-pushes-relative-cost-of-living-in-australian-cities-up-world-rankings/story-e6frg926-1226089795642
Koremans, S., 2011, Australians credit card debt climbs to $49.3 billion-Reserve Bank, mews.com.au, http://www.news.com.au/money/money-matters/credit-card-balances-climb-to-50-billion-rba/story-e6frfmd9-1226056643781
iv Ezilon.com articles, 2005, The Pros and Cons
of Using a Credit Card, Ezilon Infobase, http://www.ezilon.com/information/article_13635.shtml
v ABS, 2011, How are Australians Spending their Money?, http://www.abs.gov.au/ausstats/abs@.nsf/mediareleasesbytitle/97E70263E0B479CFCA257059007E19B6?OpenDocument