John Johnson had a $24,000 debt on his Amex card. He has paid off more than half, planning to put the balance on a no-interest card. Credit:Wolter Peeters Although representing 22 per cent of adult Australians, they make up 42 per cent of those who carry over a card debt of $5000. Managers and the tertiary qualified are also disproportionately represented among those not paying off big card debts each month. ASIC dubs this ''dumb debt'' because it piles up automatically since the minimum repayment doesn't even cover the monthly interest. In fact, dumb debt takes 30 years to repay. That's longer than most mortgages. Yet one in four credit card users carry over an average debt of $4600 each month.

Paying just twice the monthly minimum would save them 24 years of debt, and almost four times the total interest paid, says ratecity.com.au, a financial products comparison website. Under the new reporting rules, credit agencies will track your repayment history for two years and any card or loan payment that's five days late earns a black mark. This becomes a default on amounts more than $150 that are 60 days overdue. Curiously, the banks can report all your credit card limits to credit agencies but not how much you have already spent. Even more confusing is that they'll know if a credit card has been paid off. Another anomaly is that mobile phone contracts and the like, where payment difficulties are most likely, aren't counted as credit. Telcos can access your credit rating but they can't affect it. For credit cards your biggest problem may not be a potential black mark - and late fee - for missing a payment but a huge interest bill.

Apart from paying more off, one way to cut credit card interest is refinancing with a personal loan, from at 10.99 per cent compared with credit cards' average 16.9 per cent. Or you could do a zero rate balance transfer to a new card but don't spend on it - you'll be up for the prohibitive cash advance rate then. Rate City says the cheapest is issued by Westpac with 14 months interest free, reverting to 13.49 per cent with an annual fee of $45. And remember every time you apply for a credit card it appears on your credit rating. Asking for more credit isn't a good look. But under the new rules, at least if you cancel a card that will now be recorded, too. The broader credit reporting also gives you a chance to redeem yourself. But concerns have been raised that it will also enable lenders to charge more vulnerable borrowers higher interest rates.

The dominant rating agency is Veda. A free copy of your credit file is available once a year. Hard yards on his card These days John Johnson always leaves home without his American Express card. The feeling may be mutual, because once he started getting his $24,000 balance down Amex would cut his limit to the new outstanding amount. It had taken him just a few months of only paying off the minimum for the debt to spin out of control.

His card debt mounted as John and his wife, Joanne, set up their own property interior styling business, Home Dressing, based in Sydney’s Ultimo. They used the card for their working capital, but it was the automatic direct debits that crept up on him. I'd been paying it off every month and was never at the limit. But for a couple of months we were a bit tight on cash so I just paid the minimum. The balance remained the same and I was adding purchases to it,’’ John says. ‘‘I didn’t notice the direct debits – it’s easy to lose track because there’s a lot going on when you’re starting a business.’’ When he hit the $24,000 limit two years ago, Amex told him he had become a creditrisk. ‘‘That’s when I got worried,’’ Johnson says. He slammed on the brakes by no longer using the card, helped by the business requiring less investment and generating more cash. He increased the repayments above the monthly minimum andused his tax refund.

‘‘As I paid it off Amex reduced my limit,’’ he says. Which would have been a favour – but for an increased interest rate of 21 per cent even as the Reserve Bank was cutting. Loading Today the limit is $14,000 and Johnson has $11,000 left on the card, which he’s going to transfer to a honeymoon zero rate card. ‘‘I’ll use the interest free period to pay it off quickly.’’