A credit card can be useful: it can smooth a timing problem, help with an unexpected bill, or provide consumer protections on purchases. But once a balance starts rolling over, it becomes very expensive money.
The average card interest rate is about 20.99% a year, based on RBA data cited in mid-2026 reporting. That is far above a typical variable home-loan rate of 6% or so. The gap matters because every month you carry debt, interest is added to the balance — and then future interest can be charged on that interest too.
Money.com.au reported total Australian credit card debt of $44.23 billion in August 2026. Canstar estimated $19.4 billion of it was accruing interest, at roughly $10 million in interest charges each day. This is not a problem caused by carelessness alone. Finder says about 52% of Australians spend their pay before the next payday, while ABS figures show housing and food costs continued to rise in the year to July 2026.
The minimum-payment trap
Your statement minimum is designed to keep the account in good standing. It is not designed to get you debt-free quickly.
Minimum repayments are commonly a small percentage of the balance, often around 2% or 3%, or a set dollar floor. As the balance shrinks, the required payment can shrink too. That makes the debt feel less urgent — but it also stretches the repayment period.
Suppose you owe $5,000 at 20.99% interest and the card requires a 2% minimum repayment, with no new spending.
- Your first minimum payment is about $100.
- First-month interest is roughly $87.
- Only about $13 comes off what you owe.
- Next month, interest is charged again on almost the full $5,000.
This is why paying only the minimum can feel like running hard without moving forward. The payment covers interest first. Only the remainder reduces the original debt.
What a $5,000 balance can really cost
Here is a simplified illustration using a 20.99% annual interest rate, calculated monthly, and assuming you add no further purchases or fees.
If you pay a fixed $100 a month, a $5,000 balance takes about seven years to clear. You would pay roughly $3,300 in interest, so the total repayment is around $8,300.
Pay $75 a month, and the situation gets much worse. That amount is below the first month’s interest of about $87, so the balance initially grows. It cannot clear unless the payment rises.
Pay $150 a month, and you clear the debt in roughly four years, with about $1,900 in interest. Increasing the payment by $50 saves years of repayments and around $1,400 in interest compared with $100 a month.
Now imagine a larger balance of $10,000 paid at $200 a month. At the same rate, it takes roughly seven years and costs around $6,600 in interest. Keep using the card for groceries, fuel or online purchases while trying to repay it, and the finish line can keep moving away.
Exact results vary with your card’s rate, fees, repayment rules and the day transactions are posted. But the lesson is sturdy: at around 21%, time is expensive.
Why a decade-long balance happens
Most people do not plan to carry a card balance for 10 years. It happens through ordinary life: a car repair, dental bill, reduced shifts, rent increase, school costs, or several months where groceries cost more than expected.
Cotality put the national median weekly rent at a record $705 in July 2026. Finder reports more than half of mortgage holders spend over 30% of take-home pay on repayments. When housing takes a large share of income, a credit card can become a buffer. But it is a buffer that charges a premium.
The first goal is not perfection. It is to stop the balance rising.
A practical exit plan
Start with one clear number: your current balance, including any purchases waiting to appear. Then take these steps.
- Stop adding to the balance where possible. Remove the card from shopping apps and subscriptions. Use a debit card or cash envelope for everyday spending.
- Set a fixed repayment above the minimum. Choose a sustainable amount and automate it just after payday. Even an extra $25 or $50 matters.
- Keep a small essentials buffer. Aim first for $200 to $500 in a separate savings account, so a minor emergency does not go straight back on the card.
- Call the provider before you miss a payment. Ask about hardship assistance, a reduced rate, a payment arrangement or fee relief. Early contact gives you more options.
- Compare alternatives carefully. A lower-rate personal loan or balance-transfer offer may help, but only if the fees are low, the repayment date is realistic and you stop building a new card balance.
- Target the highest-rate debt first. Keep minimums on all debts, then put every spare dollar toward the card charging the most interest.
Consider an illustrative household with a $3,600 card balance — close to the $3,635 average balance reported by Money.com.au. If they free up $60 a week by pausing subscriptions, meal-planning and selling an unused item, that is about $260 a month. Added to a $100 existing repayment, a $360 monthly payment could clear the balance in around a year, rather than allowing it to drift for years.
Use the discomfort as information, not shame
Credit-card debt is not a character flaw. It is often evidence that the numbers do not currently leave enough room for shocks. Still, avoiding statements gives interest more time to work against you.
Open the statement, choose a fixed repayment, and make one phone call if you need help. Every dollar that reduces the principal cuts the interest charged next month. You do not have to solve everything today; you only need to make the balance start moving in the right direction.
This article is general information only and not personal financial advice.