Despite 84% of Australians admitting they would be worried if they missed a credit card repayment, around 2 in 5 (42%) say they can’t make their credit card repayments on time. Millennials (30%) are the most likely to fall into this category.
The survey of more than 1,000 Australian credit card holders found of those who missed a credit card repayment, almost half (49%) did so because they forgot. Australians between the ages of 25-34 (29.39%) were the most forgetful.
Around 44% missed their repayment because they couldn’t afford to pay it off while 28% could only afford to pay off a portion of the minimum repayment.
Those between the ages of 25-34 (30.89%) and 35-44 (20.95%) were the most likely to feel slightly worried if they missed a credit card repayment.
The findings are at odds with Australian’s comfort levels for being in credit card debt. Over half (55%) of those surveyed said they were only willing to fall into between $1,000 to $4,000 credit card debt, while a quarter (25%) said they were not comfortable with being in debt at all.
Most Australians (57.8%) said they did not want to go into debt for socialising, but they were willing to go into debt for things like emergencies (27.1%), electronic and home appliances (22.2%), and medical bills (21.4%).
Australians unaware of impact on credit score
Of those surveyed, 97% said they were unaware how much missed credit card repayments impacted their credit score.
Around 42% wrongly believed their credit score would only decrease minimally (by 1% to 5%) after one missed repayment, while a fifth (22% admitted they didn’t realise missing credit card repayments could potentially impact their future credit applications.
But a recent analysis conducted by Experian of 9.4 million credit card holders and over 14 million credit cards found that for consumers who are up to date on their repayments and have never missed a repayment, credit scores will drop by 22% following just one missed repayment.
That drop increases to 26% with two missed repayments, and a whopping 42% for those with three or more missed credit card repayments in the last three months.
Experian’s Executive General Manager of Credit Services and Decision Analytics for A&NZ, Poli Konstantinidis, said the findings were alarming.
“It is crucial now more than ever that Australians are aware of how their credit card repayment habits may affect their credit score. One missed credit card repayment may seem insignificant; however, it has great potential to impact applications for credit,” Mr Konstantinidis said.
“With banks now utilising comprehensive data to inform their lending decisions, and the breadth of this data set to expand in the coming 12-18 months, the way you use your credit cards impacts your creditworthiness and in turn is part of what you’re assessed on when applying for credit.
“Keeping track of your financial situation and rectifying any lapse of payments as soon as possible to help recover your credit score would be my recommendation for any Australians concerned. Remaining consistent and timely with repayments as well as checking your credit score regularly to make sure there is no negative information on your report will place you in better stead when applying for credit.”