Credit card debt is the lowest priority

by AAP | September 19, 2022 2:27 p.m. | New

Australians in financial difficulty are more likely to default on their credit cards and personal loans than on any other type of debt, according to a study.

Research shows that people are more likely to default on maxed credit cards than on cards with open credit lines.

Researcher Andrew Grant from the University of Sydney said people who felt the pinch were ultimately likely to keep a line of credit open so they could access funds if they needed them.

“We’ve seen time and time again that one card would be sacrificed, while another would continue to be serviced,” Dr. Grant said.

Similarly, people were also likely to default on an already depleted personal loan.

Australians and New Zealanders analyzed by the university and the Illion Credit Bureau were found to be the least likely to default on phone bills, followed by mortgages, then car loans.

Dr Grant says Australians in financial difficulty tend to prioritize debts that allow them to participate in society, such as a roof over their head, a car to get around and a phone to stay in contact with others.

“It’s really just a total financial meltdown that seems to lower the priority of a car loan or home loan repayment,” he said.

The fact that buy now, pay later debt is automatically debited from users’ accounts probably explains why people are less likely to default on this type of financial product than a credit card or personal loan.

“If you have to call someone to change your bank account details to avoid a payment, it will be more difficult and have other consequences, so you are more likely to avoid it,” said Dr Grant. .

The rising cost of living is putting pressure on household budgets, with headline inflation hitting 6.1% in the June quarter.

However, gasoline prices have fallen from record highs of over $2 per liter seen earlier in the year.

National average retail petrol prices fell 0.9 cents to $1.63 a liter last week, according to the Australian Institute of Petroleum report.

Retail petrol prices fell in major cities and regions, with prices falling in all capitals except Brisbane and Adelaide.

In the South Australian capital, the average fuel price jumped 14 cents per litre.

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