No-one should feel guilty about putting money into savings accounts and paying off credit card debts, financial expert Ross Gittins reassures.

Writing for the Brisbane Times, he notes that in times of economic woe, it’s only natural to hunker down and pay off debts or put more into home loan repayments.

“When recessions loom, people always worry about losing their job and so defer major purchases and cut their discretionary spending,” he comments, adding that whether people are paying off their credit cards or trying to make use of high-interest savings accounts, they are simply preparing themselves for rough weather.

However, he concedes that while this is a common reaction in every recession, Aussies may be trying even harder to pay off credit cards and home loans this time around as consumers are more in debt than ever.

Official figures showed that the amount of money used to pay off credit cards soared in December as residents took stock of the weak economic conditions.

Nationwide consumer watchdog Choice is warning frugal Aussies to stay away from credit card loyalty schemes after finding that they are only worthwhile for big spenders.

The group found that unless you put $2,000 or more on your credit card every month, you are likely to find that the points take a long time to stack up.

On average, it would take a credit card customer spending $1,000 a month on plastic more than five and a half years to save up the points for a digital camera worth around $500.

“If you are just getting your average purchases with it, it is going to take a long time before you get much worth having,” said Choice spokesman Christopher Zinn, speaking to the Age.

The study found that the fees attached to credit card reward schemes will even leave some people in the red over the course of the year.

Aussies are continuing to plough money into paying off existing credit card debts amid fears about job security, new stats from the Reserve Bank of Australia (RBA) show.

The amount of money being spent on credit cards is also on the wane, with $16 billion being put on credit in January, compared with $21 billion in December, the RBA found.

Overall, the number of credit card purchases fell 22 per cent.

Speaking to news.com.au, AMP Capital Investors chief economist Shane Oliver said the figures were a good indicator of how the average Aussie is feeling about finance right now.

“Essentially Australians are feeling nervous in the face of rising unemployment.

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Many credit card firms are open to negotiation when it comes to people repaying their debts, one debt adviser has found.

Speaking to the Sheet, Melbourne-based debt management guru Donna Elliott reveals that with Aussies looking to clear their credit card debts with the recent government cash handout, some providers are willing to lower the outstanding value to get their hands on a bigger chunk of the cash.

Ms Elliott said that some credit card companies, particularly the second-tier lenders, are willing to wipe off $1 worth of debt for 60 cents.

“One or two of the second-tier lenders are very soft touches at the moment and will cut deals very readily,” she said, with Citibank singled out as being particularly willing to trim credit card debt down to size.

However, ANZ and Westpac were said to be far less keen on the practice and were unprepared to budge in debt haggling.

Research from Mozo has shown that despite the rounds of interest rate cuts from the Reserve Bank, many “cheap” credit card companies are continuing to ping Aussies with repayment rates above 20 per cent.

Online comparison site Mozo can reveal that many zero per cent credit cards are imposing hefty repayment rates for those who fail to pay off balance transfers in the introductory period.

Exclusive research from Mozo has shown that while credit card heavyweights including NAB, Commonwealth and Westpac are offering attractive balance transfers on their credit card deals, many are hitting people with a sneaky balance transfer revert rate as high as 19.99 per cent.

Rohan Gamble, managing director of Mozo.com.au, commented: “Credit card balance transfer offers carry a huge sting in the tail for the unwary.

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