4 money traps that might be sabotaging your savings
Written and accurate as at: Jul 14, 2025 Current Stats & Facts
As useful as debt can be for building wealth or getting ahead in your career, there are some kinds of debt that can be more trouble than they’re worth. These are the ones that linger in the background, rapidly gathering interest and – if things get bad enough – wreaking havoc on your mental health.
Below, we take a look at a few types of debt it might be best to avoid, or at least approach with caution.
Payday loans for a short-term cash boost
Payday loans are short-term unsecured loans that – while marketed as being able to help you out in a jiffy – can wind up trapping you in a cycle of debt.
In Australia, licensed lenders aren’t technically allowed to charge interest on payday loans, but that doesn’t stop them from charging upfront fees as high as 20% of the amount borrowed, along with monthly fees in the range of 4%. And that’s not to mention any late payment fees or other charges that you’d have to scour the fine print to find.
The high fees and short repayment terms can make payday loans difficult to manage for people who are already struggling. And if money is short and payment is due, some borrowers might be forced to take out another loan just to stay afloat.
Over-relying on credit cards
Credit cards can be a convenient way to cover your daily expenses, and usually quite harmless if you’re able to pay off your balance in full each month. But things can get messy if you’ve got multiple cards, aren’t making payments on time, or are being tempted to spend more money than you actually have.
And if you’re only paying the minimum you’re required to pay each month, interest will quickly accumulate. Let it snowball and you might find that a good chunk of your monthly earnings are being eaten up by interest payments, while the overall balance remains stubbornly intact.
Buy-Now-Pay-Later to delay the inevitable
Buy-Now-Pay-Later (BNPL) has exploded in popularity in recent years, with even the big banks joining in on the action. But like credit cards, these can put a real strain on your finances if you’re not managing them wisely.
The problem lies in how easily they allow you to spend beyond your means. Dividing payments into smaller, more manageable chunks can seem handy at first. But if you’re racking up multiple purchases, you defeat the purpose of spreading out payments in the first place.
And because they bring down the perceived cost of an item, you might be tempted to buy things you wouldn’t have bought otherwise. This can quickly get out of hand, especially if you’re doubling up on different BNPL services to increase your borrowing power.
Consumer leases to avoid big purchases
Consumer leases let you rent household items like fridges and TVs for a set period of time. These can be useful for people who need essential appliances but don’t have the cash on hand to buy them outright. But like all items on this list, the devil is in the detail.
The regular repayments are generally quite low – in fact total repayments are capped at 10% of a consumer’s net income – but this has to be weighed up against the length of the lease. Over a long enough period, you might wind up paying much more than you would have had you bought the item outright.
The Australian Securities and Investments Commission (ASIC) keeps tight tabs on the consumer lease industry, and recently put providers on notice for potential compliance failures. If you’re considering a consumer lease, make sure you read the fine print, and try to compare it with other options first, like buying items second hand.
