Understanding the Hidden Costs of Credit Cards and How Debt Consolidation Can Help
- Jaz Stefanovski
- Dec 9, 2025
- 3 min read
Around 44 per cent of Australian credit card holders carry a balance that accrues interest, according to Finder’s latest Consumer Sentiment Tracker. With the Reserve Bank of Australia's average credit card interest rate at 18.61 per cent, many Australians end up paying significantly more than the original amount they borrowed. This growing trend raises concerns about the financial impact of credit cards and buy now pay later (BNPL) services, which have become increasingly popular but can lead to unexpected costs.
The Rising Cost of Credit Card Debt
Credit cards offer convenience and flexibility, but they come with a high price when balances are not paid off in full each month. The average interest rate of 18.61 per cent means that even small unpaid balances can grow quickly. For example, if you carry a $2,000 balance, you could be paying hundreds of dollars in interest annually, which adds up over time.
Many Australians underestimate how quickly interest accumulates. The minimum monthly payments often cover just the interest or a small portion of the principal, extending the repayment period and increasing the total cost. This cycle can make it difficult to clear debt and can affect financial stability.
The Impact of Buy Now Pay Later Services
Buy now pay later services have gained popularity for their ease and flexibility, allowing consumers to spread payments over weeks or months without upfront interest. While this sounds appealing, it can encourage overspending and create multiple small debts that add up.
Unlike credit cards, BNPL services may not charge interest if payments are made on time, but missed or late payments can lead to fees and negatively affect credit scores. The convenience of BNPL can mask the reality of accumulating debt, especially when combined with credit card balances.
How Debt Consolidation Loans Can Provide Relief
One effective way to manage multiple debts from credit cards and BNPL services is through debt consolidation loans. These loans combine several debts into a single monthly payment, often with a lower interest rate than credit cards.
lendlab offers debt consolidation loans designed to help Australians regain control of their finances. By consolidating debt, borrowers can:
Simplify repayments with one monthly payment
Reduce overall interest costs*
Improve budgeting and financial planning
Avoid juggling multiple debts
For example, if you have three credit card balances with high interest rates, consolidating them into one loan with a lower rate can save money and shorten the repayment period.
Practical Steps to Avoid Debt
Managing credit card and BNPL debt requires awareness and discipline. Here are some practical tips:
Pay off credit card balances in full each month to avoid interest
Track BNPL payments carefully to avoid late fees
Create a budget that includes all debt repayments
Avoid using credit cards or BNPL for non-essential purchases
Consider debt consolidation if juggling multiple debts becomes overwhelming
Taking control early can prevent debt from growing and improve financial wellbeing.
Why Choosing the Right Debt Solution Matters
Not all debt consolidation loans are the same. It’s important to choose a loan with transparent terms, competitive interest rates, and flexible repayment options. lendlab’s debt consolidation loans are tailored to help Australians.
Before applying, consider:
The total cost of the loan including fees
The loan term and monthly payment amount
Your ability to meet repayments consistently
Consulting with a financial advisor or using online calculators can help determine if debt consolidation is the right step.
Taking control of debt requires clear information and practical solutions. Debt consolidation loans can be a valuable tool to reduce interest costs and simplify repayments, helping Australians regain financial confidence.
