Aussies 'are increasingly avoiding credit card debt'

Friday 12 October 2012

Article by Mozo

With more households adopting an increasingly frugal approach to spending in recent years, it is hardly surprising to discover that overall levels of credit card debt are on the wane.

New figures published by the Reserve Bank of Australia (RBA) have shown that the average credit card balance dropped by one per cent in August, the News Limited Network reports.

Aussies are now sitting on a debt of around $3,262 each and this follows on from a two per cent decline in July.

In fact, credit card arrears have now fallen to their lowest point in 14 years – a clear sign that people are being far more careful with their hard-earned money.

Over the course of 2012 to date, credit balances have only increased by 0.5 per cent, which is the slowest rate of growth in almost three years.

At the same time, the use of cash and debit cards has soared by 42.7 per cent.

This is a telling statistic, as it indicates that Aussies are increasingly spending money that is already in their bank accounts, rather than racking up sizeable debts.

CommSec chief economist Craig James said that significant interest rate cuts sanctioned by the RBA since last year have clearly not been enough to encourage people to loosen the grip on their finances.

"Official cash rates have been slashed with no sustained and discernible lift in spending or borrowing," he remarked.

This is certainly not the first study that has highlighted a shift away from credit cards towards debit cards.

Research undertaken by National Australia Bank (NAB) and analytics firm Quantium recently suggested that members of Generations Y and Z are now far more comfortable using debit cards.

The survey also found distinct differences between age groups, as older people still use credit cards more frequently.

"Whether buying takeaway for dinner or booking a family holiday, it's important that customers have the right cards to suit their budget and spending habits," commented NAB's general manager of cards and personal loans Michael Shurlin.

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Aussies 'are increasingly avoiding credit card debt'

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