Credit is the drug I’m thinking of

One in two Australians (51%) agree they would be lost without a credit card, according to research published in the Citibank Payment Evolution Report (June 2007). In fact one in five (21%) strongly agree.

Credit is the drug, got a hook on me.

(Apologies to the ’70s band Roxy Music.)

That wouldn’t be such a problem if credit cards were used wisely, but they’re not. The research also shows that one in nine Australians (12%) only repay the minimum required amount on their credit card. Minimums vary but generally if you only repay the minimum it will take you between 20 – 30 years to repay the balance.

Less than one in two Australians (44%) actually repay the full balance every month. Everyone else incurs interest usually at a staggeringly high rate around 17% per annum.

If you can’t maintain the discipline to repay your credit card in full every month then don’t use one. Fortunately there are now convenient alternatives that provide the payment flexibility without the high interest rate – they are called debit cards.

With a debit card you can only access the existing balance in your account, therefore you can avoid spending more than you can afford to each month. Plus they use the payment systems of Visa or MasterCard giving you the same payment flexibility as you are accustomed to with a credit card.

Visit InfoChoice to find a list of some financial institutions offering debit cards and get control over your addiction.

Author: Matt Hern

Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.