Credit cards first option to help 21 per cent struggling with finances

16 October 2009

Latest data has indicated that while the Australian economy is indeed recovering with interest rates now on the rise, a significant portion of Australians are still struggling with their credit cards debt and other financial commitments.

A debt study conducted by Galaxy Research on behalf of Veda Advantage has concluded that 16 per cent of all Australians are reporting financial difficulties when it comes to their overall financial situation with 21 per cent of this 16 per cent stating that they will apply for new credit cards in order to meet these financial deadlines.

Other findings for the last three months in the Veda Advantage data include:

1 in 3 are worried about the future interest rate increases
13 per cent - people with mortgages having being late with at least one household bill
12 per cent - have missed paying a minimum payment
23 per cent - owe more money than they did 12 months

There were also trends based on demographics with part time workers being more likely to apply for new credit cards than full time workers.

Veda Advantage General Manager Market and Product Development, Russell Evans, stated that it was concerning to see so many people opting for new credit cards to handle their accumulating debt.

"Sixteen percent of Australians with debt are finding it difficult to make their payments. This indicates some of these people are in a high risk category, and may seek to take on more debt despite not meeting current financial obligations. There is a real risk these vulnerable individuals will become caught in debt.' He said in a statement.

"The Government's responsible lending legislation, which should pass by the end of the year, is a first step in the right direction to help these Australians. However it won't be enough. Without access to more transparent information, lenders will struggle to identify families and individuals who are in financial difficulty.

"A simple change to the credit reporting laws will allow credit providers to check a borrower's current credit commitments and repayment history before additional credit is granted. This would protect families from taking on more debt at a time when they need assistance to help them out of debt.' Mr. Evans stated.

These proposed new changes to the Privacy Act have caused a stir as people become opposed to banks being able to look into an individual full financial history.

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