Bank Savings Overshadowed by Credit Card Debts
In the past year, households have incurred $86.3 billion more debt, but Australians are showing means on curbing their personal debt by sacrificing their personal savings. There is an estimated $771 billion worth in debt owed by households, higher than 12,6 percent from the previous year. The debt comprise of owner-occupied mortgages, credit card bills and personal loans.
To augment payments on credit card debts, deposits only rose by 8 percent, making household savings at only $34.5 billion more than past figures. There is a strong indication that people are quite at ease with the presence of debts. It is like saying that everybody is doing it, so should we. Why show any sense of shame, when we are all in the same predicament. However, it is a good thing that Australians are taking the direction of paying their debts albeit in increments. The concern now lies on the low savings.
Economists are showing concern because households are not equipped to handle unexpected bills or expenses. There is no emergency fund to use since bank savings accounts are almost depleted or in some cases, withdrawn. When there are emergencies like sickness or accidents, people will not have any way to pay for medical care.
In June of this year, the Reserve Bank of Australia has shown that consumers have made repayments on their credit cards amounting to $20.5 billion. In addition, some substantial data shows that 48 percent of homeowners are exerting extra effort by repaying their mortgages while 3 percent are having difficulty to follow their payment schedule.
Incidentally the median mortgage balance of Australia is at $175,509 lower than the previous figure of $177,259 during the first quarter of this year. The median card debt for every household dropped to $1673 from $1802. To show how bank savings fare in lieu of the immense credit card debt, 53 percent of households have lower than $17,000 in bank savings while a good 17 percent have no savings left to rely on during emergencies. This cash inadequacy is not only observed in low-income households since 11 percent of households that earn more than $100,000 per year have no personal savings in their names.
Australians need to be more disciplined in incurring debts so that bank savings will not be compromised. There should be a change in the way Australians seemed to be comfortable in borrowing money as compared to last year. There is clear a danger of over-borrowing, which results to paying more on interests. This interest payment could have been set aside as bank savings, an emergency source of funds when the need arise.
Moreover, households that have non tax-deductible debts like their mortgages and credit cards should be compelled to make their payments in the soonest possible time. A good way to handle your credit card debt is by consolidating with balance transfer cards. Households should know how to maximize this option so that they can continue or renew their bank savings.
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