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Australians overlook the overdraft in favour of credit cards

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Lack of knowledge of personal overdraft accounts is costing Australians thousands in interest

Sydney, 31 January 2018: Australians continue to overlook the benefit of personal overdraft accounts, with recent research from Gateway Credit Union revealing two-thirds of Australians did not know that a personal overdraft account generally charges less interest than a credit card. 

According to ASIC’s Moneysmart website, Australia’s burgeoning credit card debt currently sits at around $32 billion dollars. This equates to an average of approximately $4,200 per card holder. At an 18 per cent interest rate, with minimum monthly repayments of $200, the average card holder would pay approximately $14,117 in interest over 30 years.

Gateway Credit Union, CEO Paul Thomas, believes too many Australians are missing out on capitalising on the lower interest rate offered by a personal overdraft account.

“Our reliance on credit cards comes down to easy access and a lack of knowledge. It’s easy to apply for and obtain a credit card, and most people are unaware that personal overdraft accounts exist. We need to shift the mindset, and go from paying everything on credit to using the funds we have available. A personal overdraft can help consumers achieve this by acting as a cost-free safety net, so long as you're not using it, while offering peace of mind if you do need to dip into it,” said Thomas.

The survey went on to reveal that Baby Boomers are the best informed, with 45 per cent claiming they know an overdraft account generally charges less interest than a credit card. This compares to 29 per cent of Gen X and 18 per cent of Gen Y.

Meanwhile it seems men are better informed than women, with 41 per cent of men claiming they know an overdraft charges less interest than a credit card, compared to 27 per cent of women.

“Generally offering a lower interest rate than most credit cards, overdraft accounts can be a better alternative than a credit card. But a lower interest rate isn’t the only feature consumers should look for in an overdraft facility. Borrowers should do their research to find a lender that offers flexibility and additional benefits. The overdraft facility we offer at Gateway is attached to our award-winning Edge account. Which means there is no establishment fee or monthly account keeping fees to utilise the overdraft facility; not to mention, the Edge account also acts as a high-interest savings account, so it lets you earn interest on your savings,” concluded Thomas.

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About the research

The research, commissioned by Gateway and conducted by Ipsos, was compiled through the January 2018 omnibus, which polled 1,037 respondents across Australia.