Many young people today are happy to impulse-shop using high interest credit cards instead of striving to achieve homeownership, according to Ayda Shabanz, a Sydney-based Gen Y property and finance educator.
Owning multiple credit cards is now part of many young people’s lifestyles—and in the age of selfies and social media, showing off trendy clothes and other extravagant purchases takes clear precedence over saving a deposit for a first home.
Many young people have become seriously addicted to their credit cards, with some exhibiting the same symptoms as someone suffering from a serious drug addiction.
“People with this problem display the medically recognised signs of addiction, such as withdrawal, loss of control, relationship issues, and continued use despite negative consequences,” Shabanz said.
“For example, negative consequences may include repayments increasing beyond genuine ability to pay them back, and lying to loved ones to explain items being purchased that cost outside of the victim’s affordability.”
Shabanz said victims may also lose control of their spending, and find that they purchase items to reinforce their emotional and mental well-being, not because they actually need these items.
“Credit card addiction itself needs to be treated, as being ruled by your credit card is no way to spend your life. Racking up debt in an uncontrolled manner is miles apart from being finance savvy.”
Once credit card addiction is successfully overcome, some people are surprised to discover that becoming a homeowner doesn’t necessarily mean bowing completely out of their social lives.
“Instagram and selfies to show off your new jewellery or hard work in the gym is part of our lives, and if you derive positive energy from it, there is no need to stop just because you are entering the property market,” Shabanz said. “Smart property investors know they don’t need to forgo their gym membership, love of fashion or holidays to own property.”
Recent government reforms that prevent credit card providers from contacting users with offers to increase spending limits are a great start. However, they don’t allow for complete credit card closure, which can further entrap credit card addicts.
Shabanz said being smart about credit card use needs to goes beyond government legislation, which is why she runs programs and weekend workshops around Australia that focus on educating attendees with the knowledge and skills they’ll need to manage their credit cards and beat credit card addiction.
“Obviously the new legislation is a fantastic start for helping to solve the addiction issue that we face, but it’s only one side of the coin. Australians need to properly understand the correct purpose of credit, when to use it and when not to, and how much to use. That goes beyond legislation. My personal goal is to help them to create a better present and future for themselves.”
