Money.com.au Credit Cards research & insights

New research from Money.com.au reveals how much of Australia’s lifestyle spending is being charged to credit cards.

The nationally representative survey found that Australians put an average of $1,200 a month in discretionary spending on their credit cards — the equivalent of $14,400 a year. Discretionary spending includes non-essential expenses like dining out, entertainment, shopping and travel.

That means more than 40% of monthly credit card transactions are going toward non-essentials rather than bills or necessities, based on the average transaction value of $2,961 per active credit card account.

Money.com.au’s Finance Expert, Sean Callery, says many Australians underestimate how much of their credit card bill goes toward funding their lifestyle.

“If you think about it, that means roughly two in every five dollars charged to credit cards each month is going toward lifestyle spending rather than essential or emergency expenses. It’s striking given the ongoing cost-of-living pressures,” he says.

“The challenge is that discretionary spending changes from month to month, so it’s harder to keep track of than essentials like rent or bills. Before you know it, you’re paying over 20% interest, depending on the card, on last month’s little luxuries, and that’s how people can easily fall into a lifestyle debt trap.”

The research found that most credit cardholders (70%) avoid interest charges and pay off their full balance each month. The remaining 30% either carry a balance into the next month and incur interest, or only make the minimum repayment each month.

Gen X outspend other generations on lifestyle credit card spending

The survey found that Gen X put more lifestyle spending on their credit cards than any other generation, averaging $1,400 a month in non-essential purchases. Millennials follow at $1,200, then Baby Boomers at $1,160. Gen Z charge the least at $735 per month, likely due to lower incomes and credit limits.

However, younger Australians are more likely to carry a balance on their credit card or only make the minimum repayment each month. Millennials (37%), Gen X (36%), and Gen Z (35%) all report not paying off their full balance each month or making only minimum repayments, compared to just 20% of Baby Boomers.

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New research from Money.com.au reveals that 39% of Australians trust the travel insurance bundled with their credit card is sufficient to cover them in the event of mishaps or emergencies overseas.

By contrast, a quarter of Australians (25%) say credit card travel insurance doesn’t provide adequate coverage, while another 15% admit they don’t know if their credit card includes it.

Money.com.au’s Finance Expert, Sean Callery, says credit card travel insurance can be good value, but it’s important to understand both the benefits and limitations.

“Many people don’t realise that the travel insurance bundled with their credit card can offer very similar inclusions and claim limits to standalone policies, as they’re often underwritten by the same major insurers. For some, it can represent good value, since the cover comes at no extra cost beyond the annual card fee,” he says.

“But because the cover is standardised for all cardholders, it may not suit every trip. For example, most travel insurance on credit cards won’t cover adventure sports or allow you to adjust claim limits the way standalone policies do. It’s also worth noting that cover only kicks in if you book your trip using the credit card, so it’s important to check the eligibility requirements before relying on it.”

The survey found that 21% of Australians own a credit card that doesn’t include travel insurance.

Millennials trust credit card travel insurance the most — Gen Z the least

Millennials were the most likely generation to trust the travel insurance on their credit card (45%), followed by 42% of Gen X and 34% of Baby Boomers. Gen Z were the least likely to trust their card’s travel cover, at just 28%.

Meanwhile, 22% of Gen Z and 21% of Baby Boomers admitted they didn’t know whether their credit card includes travel insurance, compared with 13% of Gen X and just 8% of Millennials.

Is credit card travel insurance enough for your trip?

Credit card travel insurance can be enough if you’re after generic cover as it typically includes benefits for medical emergencies, trip cancellations, lost baggage and travel delays. However, because it’s a ‘group policy’, the cover is standardised for all cardholders, meaning there’s little room to tailor it if the inclusions don’t suit your trip.

A standalone policy is generally more suitable if you need higher claim limits for long or expensive trips, have pre-existing medical conditions, or plan to take part in adventure sports. In any case, it’s essential to read the Product Disclosure Statement (PDS) carefully so you know exactly what is and isn’t covered.

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New research from Money.com.au reveals that 59% of Australian travellers paid foreign transaction fees on their most recent overseas trip — costing them an average of $80 for using their card abroad.

The nationally representative survey found that of those travellers who paid foreign transaction fees, 32% were slugged with charges of $100 or more, while just 27% paid less than $50.

Foreign (or international) transaction fees are charges banks apply when you use your card overseas or make a purchase in a foreign currency. These fees typically range from 1% to 3% of the transaction amount.

Money.com.au’s Finance Expert, Sean Callery, says foreign transaction fees are one of the most overlooked travel expenses and one of the easiest to avoid if you’re willing to shop around.

“Most people look for savings on flights, accommodation and travel insurance — but forget about international transaction fees. These charges can quickly snowball into hundreds of dollars depending on how long your trip is or how often you travel. For example, if you spend $5,000 overseas, a 3% foreign transaction fee adds up to $150 in unnecessary charges,” he says.

“The zinger is, these fees are completely avoidable. There are plenty of credit cards and even some debit cards that don’t charge international transaction fees. Some credit cards even offer reward points or cashback on eligible purchases. It’s always worth doing a little research before your next trip.”

Two in five Australian travellers surveyed (41%) said they already use a debit or credit card with no foreign transaction fees.

Gen Z hit hardest by foreign transaction fees

The research found that Gen Z travellers paid the most in international transaction fees, forking out an average of $94 on their last overseas trip — more than double the amount paid by Baby Boomers, who averaged just $42 in fees.

Millennials were next highest and paid an average of $86 in foreign transaction fees, followed by Gen X at $72.

Money.com.au’s 5 tips to avoid hefty bank fees overseas

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