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Whimsical wanderlusters: Young Australians say they are failing to pay off holiday credit card debt

August 20, 2019 Financial No Comments Email Email

New research released today from credit bureau Experian found that only 2 in 5 Australians who used their credit card for holiday expenses say they paid it off immediately after their trip. This is despite many recognising it would impact their future personal loan (50.3%), credit card (40.9%) and mortgage (34.3%) applications.

The findings were even more concerning for young Australians aged 25-34, with 4 in 5 saying they take between 1 month and 2 years to settle their holiday credit card debt.

The research of 1,000 respondents, which looked at consumers’ holiday credit card spending and repayment habits, revealed the majority (30.36%) of those who said they paid their holiday credit card bills immediately were above 54, while most of those who said they did not pay it off immediately were between 25-34 years of age (20.7%).

More than half (51.3%) of Australians say they put between $0-$4,000 on their credit card to pay for their holiday. Of the 16% of holidaymakers who say they reached their credit card limit during a holiday, the majority were aged between 25-34 – once again putting younger Australians’ credit card spending habits in the spotlight.

Experian Executive General Manager of Credit Services & Decision Analytics A/NZ, Poli Konstantinidis has called for greater financial awareness among young Australians on responsible use of credit cards: “It’s easy to get swept up in the splendour of a holiday but it’s important to make informed decisions when spending on credit cards, so as not to end up with unmanageable debt upon return and a case of post-holiday blues.”

Among the main reasons for Australians overspending on a holiday were paying for accommodation (41.1%), travel to and within destinations (39.66%) and experiences (34.3%). Interestingly, quite a few (3 in 10) say they would bust their holiday budget on shopping.

“Australian consumers, particularly in the younger age bracket of 25-34 who may well be looking to purchase their first home in the near future, need to be aware of the long-term implications of lingering holiday credit card debt,” Konstantinidis says.

The research highlights only 33.8% of those aged between 25-34 are aware that how they manage their credit card repayments can impact their ability to be approved for future mortgage applications. This lack of awareness can put consumers at an increased risk of missing their credit card repayments. Data from Experian’s credit bureau also reveals an average 22% drop in credit scores following just one missed credit card repayment (for those who are up to date with credit card repayments and have never had any missed credit card repayments recorded prior). Coupled with the current Comprehensive Credit Reporting (CCR) environment, where credit providers are scrutinising a wider set of personal financial data, it’s important for ‘whimsical wanderlusters’ to better manage their credit health to avoid a potential rude shock when applying for their next loan.

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