"Around half the people that contact us actually have credit card debt of over $10,000," said the Victoria's Consumer Action Law centre's Chief Executive, Gerard Brody.  "Many have many thousands more than that in credit card debt and, in fact, we've worked out that at least one person a week that contacts our centre has credit card debt of more than $100,000." 

 

Credit card debt is a leading reason why people seek financial counselling services, according to principal solicitor with the Financial Rights Legal Centre, Alexandra Kelly.

"Typically, they may start with one card and when they reach the limit on that card, they get a second card and a third card and so on," she said. "They end up just shuffling the debts around while the interest compounds, leaving them in unmanageable debt."

The biggest debt Alexandra Kelly has seen on a single card is $90,000, while clients with multiple cards can end up owing hundreds of thousands of dollars.

"We have had cases of people who have accrued debts of $100,000 or $200,000 on multiple cards - that is the worst case scenario," she said.

Ms Katherine Temple, a policy officer with the Consumer Action Law Centre in Melbourne, provided the Senate Economics References Committee with some insight into its work with people struggling with Credit Card Debt Accruing Interest, and by extension the scale and severity of the problem in the community:

"Consumer Action's free telephone financial counselling service, MoneyHelp, receives at least 15 calls per day from people struggling with credit card debt.  Over 50 per cent of our callers have credit card debt exceeding $10,000, over 28 per cent have debts exceeding $20,000 and nearly every week we get a call from someone with credit card debt exceeding $100,000.  However, the number of people contacting MoneyHelp for assistance is likely to be only a small proportion of those who are struggling with credit card debt.85 "

"..can lead to and exacerbate the marginalisation of struggling consumers.  It can result in significant financial hardship and, in some cases, bankruptcy and the loss of the family home.  At an acute level, credit card debt can lead to family violence, breakdown and a deterioration in health, including mental health.  It can also have a long-term impact on the capacity to provide for health, retirement and education.  These are serious and profound impacts.  Taking appropriate steps, including regulation, should be an absolute priority for policymakers."[86]

Katherine Lane, principal solicitor at the Financial Rights Legal Centre, said she sees many people mired in credit card debt. She argues credit card terms can last decades and should be limited to three years, and borrowers should be required to pay off larger minimum amounts, including the minimum of the principle. But she said after 26 years of working in the financial services sector, she still couldn't understand why credit card interest rates stay so high.  "Personal loans are for five years, credit cards are for 30. Let's change that. Banks have made a fortune at amounts they shouldn't have got – a reasonable period is three years," she said

Below are two extracts from a speech in March 2006 by David Tennant, Chairperson, Australian Financial Counselling and Credit Reform Association at their Annual Conference in Qld: 

"Queensland is the host state and custodian of the national consumer credit regulatory regime. It is also the home base of some of the worst financial scams and unscrupulous market conduct in the country. Many of these scams spread south and west much faster than the cane toad has so far been able."

SMH article "Middle class hit by debt" notes that Tony Devlin, a senior Financial Counsellor at Salvation Army's "Moneycare" service, has assisted hundreds of level 1 and level 2 Australians who have incurred huge debts on multiple credit cards.  "There are far more middle-income earners seeking a way out of the desperate cycle of huge mortgage repayments and mounting credit card debt.........And people try to keep the ship afloat by using more credit cards." 

 

The Writer spoke to Tony Devlin on Wed 7 Dec '11.  Tony told him "It is not uncommon to meet people in financial trouble who had significant debts on between 6 and 10 credit cards." 

 

Debt Relief Australia spokesperson, Deborah Southon, says the typical family credit card debt is likely to be much higher than the $3321 average with many households juggling repayments on two or more cards.

"We had a client recently who owed $450,000 and was on a salary of $40,000. She had ten credit cards and was using one to pay off the other. By the time she came to us she was almost suicidal."

Ms Southon says it's not surprising that more Australians are sliding into the debt every month, with credit card companies constantly devising new ways to lure cardholder to make more purchases and conduct more transaction, such as rewards programs and special offers.