Australians are increasingly using credit cards to survive, and overdue bills have soared in 2023.

There was a 20 per cent annual surge in credit demand over the March quarter, and a 10 per cent increase in debts that are more than 90 days past due, stated credit agency Equifax.

Overdue mortgage bills are also rising sharply amid rapidly rising interest rates, Equifax said.

“We are seeing clear signals that the cost of living and interest rate rises are impacting consumers, with arrears increasing for mortgage and auto loans,” Equifax’s Kevin James said.

“Both mortgage and auto loan arrears have risen to their highest level in two years.”

Debt levels reach $17.74 billion

Monthly credit card spending rose 12 per cent over the year to February, the latest month that Reserve Bank figures are available for, and debt levels reached $17.75 billion.

Financial experts fear families are using unsecured debt to deal with soaring rents, utility bills and mortgage repayments.

Resorting to credit cards to pay bills is a risky decision, said budgeting expert David Rankin.

“Dusting off your credit card to help with [the] cost of living is a bit like asking your enemy for help because no one else will take your calls,” Mr Rankin said.

“It’s understandable, but it’s not a great idea. That’s because using your credit card to solve financial problems puts them into a crisis down the line.”

Deb Shroot, a qualified financial counsellor with Financial Counselling Australia, isn’t surprised credit card bills are piling up amid the cost-of-living crisis, saying it indicates some are going into debt for essentials.

“Essentials are ongoing and credit cards need to be paid back with interest and fees,” Ms Shroot said.

“You might be able to afford groceries this week, but next week you’ll have to pay for groceries plus repay what you borrowed … it’s very, very worrying.”

Credit card debt has soared in Australia. Photo: Getty

Ways to avoid debt

Ms Shroot said needing to resort to unsecured credit to afford everyday essentials is a classic sign of financial hardship.

“If you’re in that situation I highly recommend speaking to a financial counsellor to see what options you have,” she said.

The National Debt Helpline, which can be reached on 1800 007 007, offers free and confidential advice to Australians about their finances.

Ms Shroot said hardship assistance is available from banks, as well as utility providers, for Australians doing it tough, provided they ask for it.

“We recommend people don’t get more debt to service their debt. That’s the first piece of advice,” she said.

“Contact your credit card provider and see what hardship options are available to you. That might include stopping interest charges for a period, or changing your payment plan to something more affordable.”

Utility companies are also legally obliged to offer hardship support and should be contacted before going into debt to pay bills, because that will ensure you don’t run up extra interest and fees, Ms Schroot said.

‘Park the plastic’

Mr Rankin said Australians should look for other ways to cut expenses or boost their income before turning to credit cards, which are typically expensive to repay with an average interest rate of 19.9 per cent.

“It’s best to park the plastic and find other solutions, such as working overtime, looking for a second job, or selling stuff you can live without,” he said.

“If you have poor spending habits, such as take-away food, coffees or online shopping, 2023 is as good a time as any to go cold turkey on these.”

But if you’re unable to pay off your entire debt straight away, Mr Rankin said meeting minimum repayments is the first step.

“It’s important to find out the monthly repayment date and due amount for each card and to start making these on-time minimum repayments,” he said.

“Most people don’t know this information and instead make random extra repayments, which gets them into even more strife.

“If you are unable to make minimum repayments, ask your card provider for hardship options, rather than going to an external debt agreement company for help.”