$12k in three weeks: ‘An addiction’
Four years ago, Jarrod Partridge and his wife racked up a $12,000 credit card bill on a "no-expense spared" three-week holiday to Japan.
Today, despite having moved to Bali to cut down on their living costs, the Melburnians still have about $4000 left to go and are paying up to $200 a month in interest.
"It was like kind of a little bit of an addiction," said Mr Partridge, 39, who runs a content marketing business and Formula One news website.
"For Christmases and birthdays we would pack up and head off to Europe. The big one that ran up the credit card the most was a trip to Japan for our wedding anniversary. We went no-expense spared. We spent a lot of time researching before we went and did things we wouldn't normally have found - hiring a car to drive around, going to obscure little BnBs, finding really amazing experiences."
Returning to Australia with the financial hangover was "a bit of a wake-up", however. Wanting to save for a house deposit, they decided to leave their "crazy rent" in Hawthorn behind and run their business remotely from Indonesia.
"But then at the same time as being here we changed our mind and decided to have a baby. We now have a nine-month-old," Mr Partridge said. "That definitely sharpens your focus on what's important."
For Perth woman Jacqueline Baril it's a similar story. The marketing lecturer still has $11,500 hanging over her head, at $280 a month in interest, from a trip home to Canada two years ago.
With an illness in the family and her partner having just been made redundant, Ms Baril, 29, applied for what she believed was a credit card with Flight Centre to pay for the trip, lured by the interest-free period.
"We only applied for $7000, they gave us one for $11,500," she said. But when she later attempted to apply for a balance transfer to a new card to take advantage of the two-year interest-free period, she realised it was "actually a personal loan masquerading as a credit card".
After paying the full 22.5 per cent interest rate for the past year-and-a-half, "our only option now is to get another personal loan" to consolidate. Ms Baril has now organised a new loan that will bring her interest down to 7 per cent.
"It'll just be a one-off monthly payment for four years (but) it's still going to cost me another $3000-$4000 in interest regardless," she said. "I don't regret it for a second. I hadn't been home for Christmas for five years."
Ms Baril doesn't blame Flight Centre's "interest-free holiday finance" for her predicament. "I think going into it you are fully cognisant whether you're going to be able to pay off $7000 in the nine-month interest-free period," she said.
"If you're using that instead of paying off the trip upfront, you're already not in a financial position where that's going to be possible. They know you're not going to be able to pay it back in the zero interest period, that's why it exists."
She added, "I don't really feel like I was scammed. I know going in they give you all the information - I think people are just optimists."
Ms Baril and Mr Partridge are among the "concerning" number of young Australians who use their credit card to pay for holidays, according to new research by credit bureau Experian.
The survey of 1000 respondents found more than half (51 per cent) admitted to putting up to $4000 on their credit card to pay for a holiday, but only 37 per cent said they paid it off immediately.
Among young Australians aged 25-34, four out of five said they took from one month up to two years to pay off their bill. That's despite many recognising that their holiday hangover would affect their ability to get a personal loan, credit card or mortgage in the future.
Experian data shows that just one missed credit card repayment - for those who are up to date and have never missed one prior - results in an average 22 per cent drop in the borrower's credit score.
Combined with the recently introduced Comprehensive Credit Reporting regime, which means banks now have a fuller picture of customers' financial situation, the credit bureau says it's easy to get a rude shock down the line.
"It's easy to get swept up in the splendour of a holiday, but it's important to make informed decisions when spending on credit cards so as not to end up with unmanageable debt upon return and a case of post-holiday blues," Experian executive general manager of credit services and decision analytics Poli Konstantinidis said in a statement.
"Australian consumers, particularly in the younger age bracket of 25-34 who may well be looking to purchase their first home in the near future, need to be aware of the long-term implications of lingering holiday credit card debt."