Credit cards repayments hurting Gen Y

15 June 2009

A recent survey completed by the Commonwealth Bank has suggested a shift in spending patterns for Gen Yer's with many younger people now using their credit cards for emergency spending only, with many reporting large debts due to previous years major spending such as overseas holidays, expensive electronical equipment and cars. The survey concluded that most Gen Yer's are now turning to their savings instead of loans or credit cards to fund these activities due to the Global Financial Crisis.

The Commonwealth Bank said of the survey that it showed Gen Yer's were adapting to the current global economic state by using their savings first, reserving credit cards or loans as a last resort. This appears to have created an interesting situation as it is during a time in many Gen Yer's lives that they are looking for their first employment, moving out of home while also now learning hard money management, according to financial and social experts.

However, making it more difficult for Gen Yer's and indeed for the larger scope of credit cards customers is the interest rates associated with many credit cards suppliers, according to the Australian Securities and Investment Commission.

According to the Commission, the majority of credit cards users are only making their minimum monthly repayments, which is leaving them in even worse financial position as this will generally only cover the interest accrued on the credit cards themselves.

An example used was a $10,000 debt would take 27 years to repay if only the minimum monthly repayments were made, with an interest bill of $11,000.

Experts in the credit cards industry generally suggest that people have only one or two credit cards and try to maintain the highest monthly repayment they can afford in order to save more money in the long term.

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