Australians are using their credit cards to breaking point. Here's how to fight back.

Most of us never plan to use our credit cards to breaking point. We have every intention when applying for one, or taking up that magical offer of a credit limit increase, to save them for emergency use only.  Pretty soon, though, we find that they are maxed out. So we come up with a payment plan, but something always comes up.

A leak in the roof, a new couch, a holiday that is too good to say ‘No’ to.

And that credit card debt ends up carrying over from month to month, for years, decades even.

Australian households have the highest level of debt relative to our incomes in the world, according to an global debt update released this week by the Bank for International Settlements. Out of 44 countries including the U.S. and the U.K, we took home the poisoned-crown with the highest ratio of household debt to Gross Domestic Product (GDP) at a whopping 125 per cent.

Look, you don’t have to understand the numbers. What is GDP again? All you need to take away from this is that we are carrying a lot of unnecessary debt per household and the only ones benefiting from this terrible habit is the big bad bankers. That’s why they keep offering to raise the limit on your credit card because you are such a “good customer”.

For a bank a good customer is someone who doesn’t know how to pay down their debts.

Clearly most of us are living way beyond our means.

Sugar Mama, Canna Campbell, explains how to get out from under credit card debt. Article continues after this video.

The most alarming part of this global debt update is that Australia has only become overly debt-happy in the past 16 years. Back in 2000 our debt level was on par with the rest of the world.

Now, post Global Financial Crisis (GFC), we are arguably even worse at managing our money than ever before. And just in case I haven’t shamed you enough, according to Money Smart that’s $32 billion of credit card debt alone, not including personal loans, car financing and mortgages.

David Rumbens from Deloitte Access Economics told The Sydney Morning Herald the debt puts Australians at significant risk. “Much of the increase in Australia’s household debt has been driven by growth in house prices, which over recent years have become increasingly detached from national income. That is, the level of debt has followed the value of the asset – rather than the ability to repay the debt.”

Clearly we continue to live beyond our means. But there are simple things that you can do to ensure your family does suffer financially as a consequence of high levels of debt:

• Pay off your credit cards
• Start paying the balance monthly
• Refinance your mortgage
• Consolidate as many debts as you can
• When you have extra, unexpected cash, put some of it towards your debt
• Do a budget – and stick to it

Surprisingly, the highest levels of household debt is carried by wealthier households. The Australian Bureau of Statistics (ABS) survey of income and wealth showed 67 percent of Australian household debt is carried by the top 40 percent by income with less wealthy families responsible for just 8 percent of the debt.

Former Reserve Bank governor Glenn Stevens said in his final speech that Australia’s high level of household debt needs to be addressed because we’ve reach our limit when it comes to benefiting from the increased economic activity that is generated by household spending, simply because most households have reach such high levels of debt.

“The problem now is that there is a limit to how much we can expect to achieve by relying on already indebted entities taking on more debt,” he told the Sydney Morning Herald.

Use the Money Smart “Debt Clock” to find out how much interest you can save by paying off your credit card faster. You’ll find it at moneysmart.gov.au.

If you or someone you know is suffering from severe financial distress contact the National Debt Helpline on 1800 007 007.