We all like to put things on credit from time to time. But you may be shocked to find out how much your credit card debt really costs.


There’s no question that credit cards are a convenient way to pay for things you need – or want– but that you haven’t quite managed to save for.

Whether it’s for essential items, like car insurance and rego or a new fridge, or the ‘nice to haves’ like a holiday or new clothes, having access to easy credit can be really convenient.

But is your credit card costing more than you’ve bargained for?

The real cost of credit

A recent estimate puts Australia’s total credit card debt at $33 billion1  – which works out at more than $3,000 for every card holder.2

This may not seem excessive: if you paid off the minimum as required each month, it wouldn’t take too long to pay it off, right?
Wrong. If your card has an interest rate of 18%, it would take you 25 years to clear that debt, paying just the minimum amount.

And here’s the worst part of all – that $3,000 credit card debt will cost you $6,521 in interest. This means everything you bought could end up costing more than three times the original price.

Long term credit card debt is not only expensive, it can also prevent you from achieving other financial goals, like saving for a home or investing. And if things go wrong, there can be serious consequences, like bankruptcy, repossession or other legal repercussions.

So, if you have credit card debt that’s holding you back, what can you do to break free?

Step 1: Pay it off as fast as you can.

The first step is to pay more than the minimum shown on your bill. In the example above, if you paid $300 a month instead of the minimum of $61 a month (reducing over time), you could clear your debt in less than a year, and pay far less interest – just $222 in total.3

Whenever you get extra money coming in – like a bonus or tax return – use it to help pay down your debt. Or, if you’re struggling to find extra cash, consider selling something on Gumtree or eBay: like that power tool you don’t know use or the designer heels that you can’t walk in. Then put the money towards paying your debt. It all adds up – and reduces the interest you’ll pay.

Step 2: Don’t go back there!

So you’ve cleared your last credit card. Now what? You’ll want to make sure you never go back into this type of debt again.

This is where budgeting comes in – and living within your means. While it may seem dull, it’s much better than being a slave to your card, and will free you up for a brighter and more prosperous future. You can find tools to help you create a budget and track your spending at moneysmart.gov.au.

If you do use your card, pay it off in full every month. And remember to leave the plastic at home at sale time – by the time you pay off the interest, you’ve no longer bought a bargain.

Step 3: Save for the future

No matter how good your intentions, there will always be times when you need to cover extra expenses – but that doesn’t mean you should always rely on credit.

Once your cards are paid off, you’ll find you have extra money in your pocket that you were using for your repayments. Rather than increasing your spending, put some money aside in a high-interest account as an emergency fund – so you have funds you can dip into when you need them.

Then, with no debt and some money behind you, you can start thinking about using it to build your future wealth – maybe buy a home, invest or start a business.

Find out more

If debt is holding you back, we can help guide you to break free from debt and build wealth for the future. Call us today on |PHONE|.


1. ASIC MoneySmart https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock
2. ASIC MoneySmart Credit Card Calculator
3. ASIC MoneySmart Credit Card Calculator

Important information and disclaimer

Any advice in this communication is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this communication we recommend that you consider whether it is appropriate for your personal circumstances.  Any tax estimates are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation or financial advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent and financial advisor before making any decisions.