More than one in five Australians have applied to increase their credit card limit over the past year in a worrying sign households are exacerbating price pains with short-term relief.
New data from Money.com.au, shared exclusively with SkyNews.com.au, showed 23 per cent of Australians were on average requesting a $3,000 credit card limit increase.
This is about a 30 per cent boost to the typical credit card limit in Australia.
Younger Australians were more likely to push for a bump, with 56 per cent of Generation Z and 40 per cent of Millennials reporting they asked for an increase.
Money.com.au’s finance expert, Sean Callery, said Australians should try to avoid becoming reliant on credit as their cost pressures grow.
“A higher credit limit can provide extra flexibility, particularly when households are dealing with rising expenses. But it can also signal a growing reliance on credit to manage living costs, and that’s when we start to enter risky territory,” Mr Callery said.
“That’s because the more you rely on credit to cover everyday expenses, the easier it is for balances to build up and become harder to repay, and that’s when interest charges begin to add up.
“That’s the debt spiral people can sometimes struggle to get out of.”
Many younger cash-strapped respondents were knocked back with 17 per cent of Gen Z reported being declined for a bump despite requesting the smallest credit limit increase on average of about $2000.
Mr Callery said younger Australians should remain cautious about applying for credit limit increases as it may dent their finances going forward.
“If you’re declined and then reapply multiple times, it can show up on your credit file, raise red flags for lenders and make it harder to access credit in the future,” he said.
Older generations reported facing fewer challenges acquiring credit card limit increases.
Only nine per cent of Millennials and five per cent of Generation X were declined.
These generations on average requested a $3500 bump, while zero Baby Boomers reported being declined, despite requesting an average increase of $4000.
Mr Callery warned Australians that there can be complications if they raise their credit card limit to build a buffer that allows them to keep cash elsewhere, such as in a savings account earning interest.
“It’s important to remember that boosting your limit also increases your capacity to take on more debt, so it should only be done if you’re confident you can manage repayments comfortably,” he said.
“It can also reduce your borrowing capacity when applying for a home loan, as lenders factor in your total available credit limits as part of their serviceability assessment.”
The large number of Australians pushing for a credit limit extension comes as cost of living pressures have plagued households across the nation.
Inflation sits at 3.7 per cent and is expected to jump to about five per cent as the impact of the oil crisis is factored in.
Meanwhile, the Reserve Bank of Australia has hiked the cash rate twice this year and is expected to deliver another increase next month – undoing all of last year’s cuts.