Here is what we know about the decrease in credit card debt in Australia
Recent statistics from Australia show a meaningful reduction in credit card debt in July 2025, marking the biggest monthly drop in several years.
Key figures
- Australians paid down about AUD $274 million of interest-accruing credit card debt in July.
- Total personal credit card debt accruing interest stood at AUD $17.7 billion.
- This level is 0.4% lower than in the same month in 2024.
- Over the past year, Australians have closed around 180,000 credit card accounts.
What Caused the Drop?
Several factors appear to be contributing to this pay down:
1. Tax Returns
July in Australia is a tax-return season. Many Australians receive refunds or offsets and often use that windfall to clear or reduce high-interest credit card balances. This pattern has historically contributed to debt reduction.
2. High Interest Rates on Unpaid Balances
The debt that remains is expensive to carry. Interest rates on credit card balances accruing interest are near 18.7% p.a. for many Australians. This creates strong incentive to prioritise repayment where possible.
3. Reduced Number of Accounts and Possibly Lower Usage
The closing of many credit card accounts, around 180,000 over a year, may indicate some people choosing to get out of revolving debt altogether or reducing credit exposure. Lower usage of cards that would otherwise carry debts can also help.
4. Regulatory and Behavioural Changes
Broad financial pressure such as cost of living, inflation, and mortgage burdens means discretionary spending is more constrained in general. People might be more cautious with debt. While the data does not attribute the drop entirely to such behaviour, analysts like those at Canstar have noted rising debt-conscious attitudes.
What This Means for New Zealand
For readers in New Zealand, the Australian case is relevant for several reasons. Both countries face similar cost-of-living pressures, interest rate cycles, and comparable trends in how consumers manage debt.
Here are the New Zealand figures and how they compare:
- As of July 2025, New Zealand’s total credit card balances (business and personal) were about NZD $5.95 billion in advances outstanding. This is down year-on-year by roughly 0.7%. (Reserve Bank of New Zealand)
- The weighted average interest rate on personal interest-bearing credit card balances remained high at around 19.8% p.a. in July. (Reserve Bank of New Zealand)
- Only part of total credit card spending attracts interest, since many cardholders repay within interest-free periods. However, the cost of carrying unpaid balances remains high.
Like Australia, New Zealanders face steep interest costs. Recent data shows modest declines or stabilisation rather than growth in credit card debt.
Comparison and Insights for New Zealand
- Debt magnitude: Australia’s interest-bearing credit card debt (AUD $17.7 b) is far larger in absolute terms than New Zealand’s (NZD $5.95 b). However, household size, income, and exchange rates make direct comparisons difficult.
- Interest rates: Both countries have credit card interest rates in the high teens, making unpaid balances expensive in both places.
- Behavioural patterns: The Australian drop in July, fuelled by tax-return inflows, may have parallels in New Zealand. For example, when consumers receive extra cash such as refunds or bonuses, they might use it to reduce high-interest debt.
- Policy and regulation: Alternatives like Buy Now, Pay Later and other credit substitutes are affecting credit card usage. New Zealand has also seen changes in credit limits and utilisation. (RBNZ report)
- Risk factors: High interest, inflation, and mortgage pressures make carrying debt risky, especially when interest rates are high or variable.
What New Zealand Consumers Can Learn
- If extra income, windfalls, or refunds come in, consider targeting interest-bearing debt first. The drag from credit card interest is heavy.
- Review the number of cards, interest rates, and whether balances are being carried instead of fully paid off each cycle. Eliminating or consolidating high-rate debt can make a big difference.
- Shop for lower interest rates or shift usage into interest-free payment options, but be cautious of fees and conditions.
- Monitor credit limit utilisation. High utilisation attracts more interest and may affect borrowing capacity.
- Be aware of regulatory and market changes, as they can impact debt costs and repayment behaviour.
