A life without a Credit Card by Tina Zawila

Recently I was speaking to a young couple in their 20’s after they came back from a weekend getaway.  They had flown to their destination and once they arrived they realised that using public transport to get around and see the sights was impractical and expensive, so they decided to hire a car.

One problem.  They didn’t have a credit card that they could use for a security deposit.

Ok, what about using Mum or Dad’s credit card? Nope, the hire company would only accept a credit card in the name of the hirer/driver.

I know, they could have paid the deposit in cash, but they also didn’t want to use all of their holiday cash to pay a security deposit and possibly leave themselves ‘short’ over the weekend.

In the end, it was all ‘too hard’ so they didn’t bother with the hire car.

However, it occurred to me, how common place credit cards are, yet they are one of the biggest financial traps/burdens in our economy.   When you consider the interest rate on a credit card is often around 19.99%, this form of finance is extremely expensive.

According to a report issued by the Reserve Bank of Australia in March 2016, there are over 16 million credit cards in Australia (growing by 3.4% every year), and they net a national debt accruing interest of around $32 billion.  The average credit card has a balance of over $3,000 with two thirds of that balance accruing interest.

When I spoke at a National Youth Week event recently, I strongly encouraged the attendees to steer clear of credit cards, opting instead to use their own money via debit card. 

I honestly believe that our economy needs the next generation to learn to live within their means.  Save for their big ticket purchases, and avoid high interest finance for consumable or depreciating items. 

And as for the 16 million credit cards already in circulation – we all need to reconsider our finance options to reduce the credit card interest burden on our household budget.

If you need financial advice, contact the team at Sothertons on 4972 1300, we would be happy to help you become financially well organised.