The amount owed on Australians’ credit cards rose by more than $660 million in June, the second largest spike on record for the month

The amount owed on Australians’ credit cards rose by more than $660 million in June, the second largest spike on record for the month.

If this continues, the resulting huge increase in spending could do serious harm to Australia’s figures and lead to even higher interest rates. 

With wages growth failing to keep pace with price hikes, many have been tempted by the plastic solution of pulling a credit card out of their wallet or purse.

But the Reserve Bank of Australia wants to see the opposite happening. By raising interest rates at the fastest pace in three decades, it is trying to reduce overall levels of demand.

If Australians start to spend billions a year more on their credit cards, it makes the RBA’s task harder and could lead to higher than expected rate rises.

Credit card spending has become such a concern, that Australians who want to get a home loan are being told they will have to cut up all their credit cards. 

Other countries with similar economies, such as the US, have already seen massive growth in credit spending.

In March alone, Americans added more than $37 billion (US$25 billion) to their collective credit card and prop money for sale line of credit balances. 

Australia had been moving away from credit card spending since the global financial crisis hit in 2008 – when credit card purchases made up an incredible 20 per cent of Gross Domestic Product.

Having learnt a harsh lesson from the GFC, Australians slowed their credit card spending and have also, in recent years, started to use ‘buy now, pay later’ services.

Much of the increased credit card debt accrued in June was as a result of Australians going abroad in big number for the first time since the pandemic started in 2020. 

They used their credit cards to pay for flights, accommodation, and CAD $5 Bills going on holiday, as well as to cover basic cost of living expenses at home. 

<div class="art-ins mol-factbox floatRHS news" data-version="2" id="mol-779ba700-318e-11ed-a751-bb447f349bf1" website Australian credit card spending may lead to higher interest rates