Most of us never plan to use our credit cards to breaking point. We have every intention when applying for one, or taking up that magical offer of a credit limit increase, to save them for emergency use only. Pretty soon, though, we find that they are maxed out. So we come up with a payment plan, but something always comes up.
A leak in the roof, a new couch, a holiday that is too good to say ‘No’ to.
And that credit card debt ends up carrying over from month to month, for years, decades even.
Australian households have the highest level of debt relative to our incomes in the world, according to an global debt update released this week by the Bank for International Settlements. Out of 44 countries including the U.S. and the U.K, we took home the poisoned-crown with the highest ratio of household debt to Gross Domestic Product (GDP) at a whopping 125 per cent.
Look, you don’t have to understand the numbers. What is GDP again? All you need to take away from this is that we are carrying a lot of unnecessary debt per household and the only ones benefiting from this terrible habit is the big bad bankers. That’s why they keep offering to raise the limit on your credit card because you are such a “good customer”.
For a bank a good customer is someone who doesn’t know how to pay down their debts.
Clearly most of us are living way beyond our means.
Sugar Mama, Canna Campbell, explains how to get out from under credit card debt. Article continues after this video.
The most alarming part of this global debt update is that Australia has only become overly debt-happy in the past 16 years. Back in 2000 our debt level was on par with the rest of the world.
Now, post Global Financial Crisis (GFC), we are arguably even worse at managing our money than ever before. And just in case I haven’t shamed you enough, according to Money Smart that’s $32 billion of credit card debt alone, not including personal loans, car financing and mortgages.