Tom Hartmann: Sorted Personal Finance Lead on the increase on Kiwis applying for credit cards

Kiwis struggling to stay afloat have turned to credit cards to bridge the cap amid an ongoing cost-of-living crisis.

New credit card application enquiries have reached their highest level since 2021- and card arrears have jumped 4.4 percent in August.

Sorted Personal Finance Lead Tom Hartmann says living costs have increased and bills have piled up - and people feel the need to borrow their way through it.

"From power, from kids' sports fees - it could be many different situations. And this is just one way to get through it."

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Episode Transcript

Speaker 1 (00:00):
New Zealand has just recorded its highest number of credit
card applications since twenty twenty one. Credit card areas are
also on the rise, up to four point four percent
in August. Financial hardship cases are up a quarter, were
almost a quarter a year on year, and twenty nine
percent of those cases relate to credit card debt. Tom
Hartman is the personal finance lead. It's sorted and is

(00:22):
with us this afternoon. Kielder, Tom Koda.

Speaker 2 (00:25):
Great to be with you, Jack.

Speaker 1 (00:27):
What do you put this down to?

Speaker 2 (00:30):
Well, I think we're headed like cost of living is
still is still binding. These are still really tough times,
and now that we're heading towards what it's called the
Bermuda triangle of family finance, which is Christmas, the holiday,
and then back to school, and so we're seeing all
these costs coming at us at the moment. One way

(00:51):
to cope with them is to borrow our way through
it on credit cards.

Speaker 1 (00:55):
Yeah, why is it so bad right now? The cost
of living has been an issue for some time.

Speaker 2 (01:01):
Now.

Speaker 1 (01:01):
What do you think it is about this time in
particular that is leading to such a surge in credit cards.

Speaker 2 (01:08):
Well, if you look at hardship, what that centric report
is telling us is that it's really more than ever
difficult for people to get by these days. And there
are a couple lot of bills that have maybe maybe
piled up from power from kids, sports season, could be

(01:29):
it could be many different situations and you know, this
is just one way to get through it.

Speaker 1 (01:35):
Yeah, it's interesting to break down the numbers. The age
group experiencing the highest levels of financial hardship at the
moment are those in their late twenties, mid to late twenties,
so thirty five to thirty nine. Why do you reckon
that is?

Speaker 2 (01:49):
Yeah, and I'm wondering if this is you know, because
they're young families and you know, costs from you know,
getting through these times, you know in terms of everyday bills,
but also school school fees, holidays coming up. I think
people are also preparing. But you know, credit cards they're

(02:12):
still really incredibly an expensive way to do this, and
there's such a variation in how much they cost us.
This is expensive money.

Speaker 1 (02:21):
Yeah, I mean, do people have the financial literacy to
know how to navigate credit card date?

Speaker 2 (02:29):
This is an extremely sticky product too in terms of
a way of borrowing, so you get your credit limit
and you know, our minds go to, oh, this is
how much money I have to work with, but it's
really only your credit limit is the amount that you
can borrow, and when you're borrowing, it can be incredibly expensive.

(02:49):
One of the cheapest ones is thirteen point nine percent,
but they can go up as high as double that
twenty seven point nine to nine. This is this is
really an expensive way to do this.

Speaker 1 (03:00):
Are there alternative options for people?

Speaker 2 (03:03):
Well, I really hope that people are aware that there
are no interest and low interest loans out there that
can really, you know, be a good alternative. They're not
for everyone, but they're available from groups like Good Shepherd,
Non Tanga to Finance. You know, they're really set up
to help people borrow in a much safer way.

Speaker 1 (03:25):
Yeah. And for the time being, looking at these latest numbers,
what do you think it means for our financial future?
What will high levels of credit card use and potentially
credit card date mean for New Zealand's economic recovery?

Speaker 2 (03:39):
Well, I think in general we're going to get stuck
with the bill. We'll be carrying you know, balances for
a while, paying it down slowly, and you know, these
balances are going to stick with us for a while,
and basically we're going to be paying that interest over
a long periods to come.

Speaker 1 (03:55):
Thanks for your time, Tom, I appreciate it.

Speaker 2 (03:58):
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