For thousands of Australians, making day to day purchases on their credit cards and managing credit card debt is a common theme.

In fact, Australians made over 227 million credit card transactions in July 2020 alone.

Australians have a history of racking up large amounts of personal credit card debt; with credit card debt being a large contributor to Australia having some of the highest personal debt levels in the world.

But we’re also turning debt reduction into an art form in the 2020s.

Since COVID hit in March, Australians have wiped almost $4.2 billion off their credit cards.

There are people who love credit cards, and people who hate them. However, people who sit on the credit card fence do have a few points.

Credit Cards Can Be Debt-Traps!

There are more than a handful of debt strategy pro’s with credit cards, if using them correctly; people can make their payments on time, and keep their balance low.

By doing so, many Aussies are using credit cards to build a good credit score that can be used to qualify for a mortgage or personal loan.

Many credit cards also come with 0% interest on purchases, interest-free periods and balance transfers for an introductory period of at least 6 months. This gives you the convenient ability to pay off your balance over time, without incurring any extra costs. The use of credit cards also gives the ability to earn rewards that can be used for cash, gift cards, miles or other merchandise. You can use the rewards on the go, or save up for bigger redemptions.

There is great power in being aware of how to use credit cards efficiently. For a number of Australians, however, a few bad mistakes have resulted in a downward debt spiral that only contributes to the bottom line of the banks.

The Illusion of Credit

Credit cards open up additional purchasing power and give the owner the illusion that they have more money than they actually do.

This opens up the temptation to spend more than you can afford. Credit cards also bring the potential of debt into play. You can keep the debt from growing by paying off your balance each month… but if you only pay the minimum and keep making purchases, your debt will grow. This will also reduce your future income, each time a portion of your future income goes toward repaying your credit card balance.

While credit cards have some negative aspects, these can be easily minimised as long as you’re smart with the cards you choose, and the ways you use them.

There are a lot more pros and cons to credit cards that we didn’t mention here. If you are looking to get a credit card, make sure you do some research and find out what you are getting into, as well as what you’re getting out of it.