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The Interest-ing Facts About Credit


There is a fascinating page on ASIC’s MoneySmart website. A “Credit Card Debt Clock” (https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock) that displays in real time how much Australians owe on their credit cards. When we started writing this article it was up to $33,017,544,000 in outstanding debt with an astonishing amount of around $5,441,291,000 per annum owed in interest! That’s more than thirty-three billion dollars in credit card debt with an annual interest bill of well over five billion dollars! At time of writing this represents just over $4,252 per card holder in Australia.


You might be wondering why is there more than $5,400,000,000 owing just in interest on Aussie’s credit cards – read on and all will become abundantly clear.

Will you still have your credit card purchases in nine years?

If you owed the average $4,252 on your card and the credit provider required you to pay a minimum monthly payment of 2% of the balance, you would have to pay only $85 per month. At 20%pa interest it would take you just under 9 years to pay $4,252 off! If that sounds incredulous, over this time you would repay a total of $9,184 – yes, an extra $4,932 in interest!

But wait, it gets even more interest-ing!

If you pay just twice the minimum monthly amount ($170 in this example) you would knock more than 6 years off your debt, paying it all off in just under 2 years and 9 months, and save yourself over $3,642 in interest. So the best plan of attack is to pay as much as you possibly can every month – preferably the entire balance.

Many people think they will be able to control their credit card debt, but as you can see, when it comes to compounding interest, a small balance can quickly get out of hand.

If you have a credit card debt around the average Australian balance and are struggling to get on top of it, please seek professional advice. Acting early will save you many thousands of dollars – not to mention your credit rating.

FOR YOUR INFORMATION

ASIC’s MoneySmart website www.moneysmart.gov.au Borrowing and credit – Credit cards – Credit card debt clock


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Toowoomba Financial Centre Pty Ltd ABN 88073088070, trading as TFC Financial is a corporate authorised representative of Charter Financial Planning Limited ABN 35 002 976 294 Australian Financial Services Licensee License number 234665. This article contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making any strategy or product decision.

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December 4, 2018

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Toowoomba Financial Centre Pty Ltd ABN 88 073 088 070, trading as TFC Financial is a corporate authorised representative of Australian Financial Services Licensee 234665, Charter Financial Planning Limited ABN 35 002 976  This website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making any strategy or products decision.

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