Young Australians looking to get through the hardest financial period of the year should be careful to rely on credit cards, experts say.
New research by the financial services company Canstar found that the majority of Australians under the age of 25 are moving away from credit – only 10% have a credit card
MORE: Why credit cards are more difficult to get in 2019
But despite this, the Reserve Bank of Australia figures show that Australians are still plastic-dependent – $ 51.5 billion are owed more than $ 31.7 billion are accumulating interest.
The financial comparison website, Mozo spokesman, Tom Godfrey, said that instead of using credit, Millennials could sign up for "buy now pay later" such as Afterpay and Zippay.
because they do not require checks on the history of credit
"It is not surprising that credit cards are not the only payment option for young people," said Godfrey.
"With the increase in buy now, pay late for apps, a credit card is not necessarily the must-have it was was."
Canstar's spokeswoman Belinda Williamson warned Young Australians avoid accumulating mountains of debts on credit cards that could affect their credit rating later.
Your first credit card is a huge financial commitment and responsibility, "he said.
" A good rule is to just credit what you can comfortably afford to repay in your next payment cycle. "
Buy Now Pay later schemes attract fees and charges, but unlike credit cards do not charge interest to users.
Luke Vandager, 20, got into trouble shortly after receiving a credit card for his 1
Mr Vandager's parents warned him of the potential dangers
"My father thought that getting a credit card was a bad idea," he said.
"He said, & # 39; you see & # 39; and I think I did. "
Mr. Vandager believed a credit card would free more money for him to invest in market share." I had a plan to invest, I thought I was smarter, "he said.
He fought small amounts of credit card debt for about two years, putting him under financial stress.
"A credit card separates you from how much money you actually have. It was easy to overestimate my next pay check. "
Mr. Vandager quickly accumulated over $ 2,000 in card debt in the first few months.
Initially he used it as a way to pay small expenses such as dinners and drinks.
" My friends said: & # 39 I can not afford to go out tonight, "he said." With the credit card, I did not have this problem. "
While Mr. Vandager still has a credit card, he said he was dealing with it better He has since lowered the limit of his card to $ 1000.
BUY NOW, PAY AFTER SCHEMES
· Avoid long approval times and costs of registration.
· You do not have to pay any interest on your refunds.
· Some providers have spending limits and late payment costs.
· Not expected no credit check to make sure you are able to make payments.
· Offers quick access to finance, convenient transactions and could
offer rewards for spending.
· Provides an emergency fund and is provided with anti-fraud protection.
· It has a cost with the provider that charges interest and possibly commissions.
· Increase the temptation to spend and can destroy your credit score.