Australians have wiped $274 million off their credit card debt in July – the largest single-month paydown in three years – according to new figures from the Reserve Bank of Australia (RBA).

The total debt accruing interest on personal credit cards now stands at $17.7 billion, down 0.4% from this time last year.

Canstar data insights director Sally Tindall said the drop was fuelled in part by tax return windfalls.

“History shows a little extra cash in July usually goes straight onto these high-interest cards,” Tindall said. “However, this July was the biggest monthly drop in credit card debt accruing interest we’ve seen in three years. Some Australians have even managed to clear their debt entirely.”

The data also reveals a broader trend.

The number of personal credit card accounts has declined by 180,000 over the past year, with more than 2 million accounts inactive in July.

Despite rising prices, spending on credit and debit cards fell by nearly $2 billion compared with June, suggesting Australians are prioritising debt repayment over splurging.

While Australians celebrate this progress, average interest rates on outstanding card debt remain high at 18.69%, meaning there is still a significant financial burden to tackle.

Tindall encouraged cardholders to explore options such as switching to lower-rate cards, consolidating debt into personal loans, or making extra repayments.

Meanwhile, major banks have warned Australians they could face higher credit card costs if the RBA moves forward with its proposed ban on transaction surcharges and cuts to interchange fees.

The Australian Banking Association (ABA) said lenders may respond by shortening interest-free periods or raising fees, which could offset the intended benefits for consumers.

“Although banning surcharges will be welcomed by consumers, reducing interchange fees could lead to higher card costs, shorter interest-free periods, and diminished rewards,” ABA chief executive Simon Birmingham said.

The RBA estimates the surcharge ban could save consumers $1.2 billion annually, but banks caution that global payment providers and “buy now, pay later” services may benefit disproportionately, potentially placing more pressure on Australian households.

For now, the focus for many Australians appears to be on using extra cash wisely.

July’s record credit card paydown shows that even small steps, including applying tax returns to debt, can make a measurable dent in high-interest balances.