Australians struggling to pay off holiday debts

Alex Brewster By on August 21, 2019
 
Australians struggling to pay off holiday debts

Photo by Kalen Emsley on Unsplash

New research has revealed three out of five Australians took between one month to two years to pay off their holiday credit card debts.

The findings from credit bureau Experian also found that more than half (51.3%) of Aussies put up to $4,000 on their credit card to pay for a holiday.

Meanwhile, 16% of Aussies reached their credit card limit during a holiday, the majority (28.75%) of those aged 25 – 34.

The research highlighted more worrying results for young Australians, with 20.7% of the 1,000 respondents who said they would take one month to two years to pay off their holiday debt aged between 25 – 34.

These results come despite many of those surveyed recognising their holiday spending would impact future applications for:

  • Personal loans (50.3%)
  • Credit cards (40.9%)
  • And mortgage applications (34.3%)

Only 34.4% of those surveyed said they would immediately pay off holiday credit card expenditure, with the majority (27.62%) of these being above the age of 54.

Experian Executive General Manager of Credit Services & Decision Analytics Poli Konstantinidis has called for greater financial awareness among Australians on the 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,” Mr Konstantinidis said.

How can holiday debt affect credit scores?

The Experian research found only 33.8% of those aged between 25-34 were aware of how their management of credit card repayments could impact approval for future mortgage applications.

The credit bureau found that for those who are up to date with credit card repayments and have never missed any prior to their holiday, just one missed repayment saw a 22% drop in credit scores on average.

“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,” Mr Konstantinidis said.

With credit providers scrutinising a wider set of personal financial data, Experian said it’s important for ‘whimsical wanderlusters’ to better manage their credit health to avoid a potentially rude shock when applying for their next loan.

Other key findings

The top three reasons for Australians to go over their holiday budget were accommodation (41.09%), travel (39.66%) and experiences (34.33%).

In perhaps unsurprising news, three in ten said they would go over a budget due to shopping.

Of those who reached their credit card limit during a holiday, 58.75% were women while 41.25% were men.

However, 52.86% of women and 47.14% of men were among those who paid off their holiday credit card balances immediately.

Where are we accumulating this debt?

According to the Australian Bureau of Statistics (ABS), New Zealand is the leading overseas destination for Aussie travellers, with 1.4 million of us making short-term trips across the Tasman in the year ending 30 June (2018-19).

Indonesia comes in a close second with 1.31 million Aussie tourists, while the good old USA rounds out the top three with about 1.08 million.

The UK, Japan, China and Thailand are also represented in the top 10.

Destination Country: 2018-19 — year ending 30 June ‘000
New Zealand 1 444
Indonesia 1 311
USA 1 079
UK 668
China 611
Thailand 565
Japan 484
India 416
Singapore 405
Fiji 345

Source: ABS Overseas Arrivals and Departures, Australia, Jun 2019

ABS Director of Migration Statistics Jenny Dobak said the record annual 11.2 million trips Aussies made overseas in 2018-19 was 5.4 million more than 10 years ago.

“There has generally been an ongoing increase of Australian residents travelling overseas over recent decades,” Ms Dobak said.

With so many more Australians travelling overseas, there’s greater opportunity to accumulate credit card debt.

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Alex Brewster
Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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