Credit card spending: Millions of Australians use credit cards to afford cost-of-living crisis

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Millions of Aussies are changing their credit card limit to stay afloat during the cost-of-living crisis.

Credit card spending hit an all-time high of $35.5bn in January 2024, a sharp increase after a five year downturn was reported from May 2017 to April 2022.

Finder released its latest credit card report on Tuesday, using aggregate credit card data from the Reserve Bank of Australia (RBA) and data from Finder’s consumer sentiment tracker (CST).

One in five Australians with a credit card – or about 2.2 million people – have changed their limit in the past 12 months, according to the data.

A quarter of them said they increased their limit because they were struggling with rising costs.

The report also found that 4 per cent of credit card holders had increased their limit to afford a more expensive lifestyle, while 3 per cent decreased their limit to reduce temptation or increase their chance of approval on a home loan.

Finder head of consumer research Graham Cooke said the high cost of living had “exposed vulnerabilities in household finances”.

“Some households have suddenly upped their outgoings significantly and are turning to plastic to cover the difference,” he said.

“Aussies should be careful to keep track of spending on plastic and pay it off in full every month to avoid interest charges.”

The report also revealed the startling number of credit card holders who signed up to for a credit card at least in part so they could earn rewards points.

Nearly half of credit card holders (46 per cent) who collect rewards points said they struggled to satisfy the card’s minimum spend requirements, according to the report.

One in eight people admitted they were able to met the spending requirement but ended up in debt as a result.

“Rewards credit cards can be an extremely powerful financial tool but can quickly become a nightmare if you can’t comfortably meet the minimum spend requirements,” Mr Cooke said.

He recommends consumers find out what type of spending is eligible for rewards points, with paying off tax bills and car registrations often excluded in the fine print of the contract.

He also warned that interest charged for late payments could wipe out the value of rewards, so credit card holders should stay vigilant on paying off the balance in full each month.