A decade of change in credit cards: Aussies cutting debt, embracing BNPL, and spending less per tap

Key Findings:

• Savvier Spending: Average domestic credit card purchases have decreased by 23%, from $118 in 2014 to $90 in 2024.
• Reduced credit card debt: Balances accruing interest have dropped by 45%, from $31.8 billion to $17.5 billion.
• More low and high rates: Mid-range credit cards (10-15% p.a.) have declined by 57%, while low-rate (1-10% p.a.) and high-rate (20%+) cards have increased.
• Rising annual fees: The average annual fee has risen by 25%, from $111.55 to $134.76, with the highest fee nearly doubling from $700 to $1,200.
• Impact of BNPL: Mozo research shows 54% of Aussie credit card holders have a BNPL account, so there is a risk that debt is not being reduced, just repositioned into BNPL.
• BNPL debt: Mozo research from earlier this year showed the average outstanding BNPL debt is $919, and Aussies with multiple accounts owed up to $1,766.

An in-depth 10-year analysis of credit cards conducted by financial comparison site Mozo has revealed Aussies are becoming savvy credit card spenders, prompting a shift in the rates available to consumers as banks attempt to recoup lost interest revenue. 

“As the cost of living goes up, people are being more cautious with their spending, and working to pay off debts faster, to cut down on any interest charges,” says Rachel Wastell, Mozo’s personal finance expert.

“This shift in behaviour is a positive response to the high-inflation and high-interest rate environment we’re navigating, and overall I would say that Australians' change in credit card use over the past decade has been positive, as consumers reduce credit card debt and opt for smaller transactions,” says Wastell.

“However, we must consider the role of BNPL services in these trends, as although regulation was introduced to ensure BNPL users are protected under the Credit Protection Act, there is no regulatory authority tracking and publishing data on the BNPL debt Aussies are accumulating.”

Aussies get savvier with credit cards

Mozo’s comprehensive analysis sheds light on a significant shift in credit card spending, with responsible purchasing and debt reduction at the forefront.

The latest RBA retail payments data* highlights a trend towards more prudent credit card usage among Australians. Over the past decade, the average purchase amount has decreased by 23%, from $118 in 2014 to $90 in 2024. 

Credit card balances accruing interest have also dropped by a whopping 45%, from $31.8 billion to $17.5 billion. On a per-account basis, these balances have decreased by 37%, from $2,206 to $1,388. This reflects the broader move towards smaller, more manageable transactions and an emphasis on paying off debt faster.

Credit Card Rate Shifts

Mozo analysis found that the credit card market has experienced notable changes in the past ten years, and has polarised, with a significant decline in mid-range offerings and a rise in the number of cards with purchase rates under 10% and over 20%.

This highlights the value of shopping around before deciding on, and applying for, a credit card, as there are much larger interest rate savings on offer for savvy switchers.

“We’re seeing a clear polarisation in the credit card market, and though a number of new low rate cards have entered the market, higher rates have also increased,” Wastell explains. 

“Consumers need to be vigilant in comparing rates and fees to find the best card for their needs, and consider if their loyalty to their current credit card provider is costing them unnecessarily.”

Rising Fees and Extended Benefits

As banks adjust to decreased interest revenue from declining balances accruing interest, they have extended interest-free periods but increased annual fees. The maximum number of interest-free days has nearly doubled to 110, however this is only from one provider, Humm, and the next best interest-free period on offer is 62 days.

The average annual fee has risen by 25%, from $111.55 to $134.76, with the highest fee nearly doubling from $700 to $1,200.

“With annual fees on the rise, it’s crucial for consumers to choose credit cards that offer the best value, and if you’re going to be paying a high fee just make sure the benefits you are receiving at least outweigh the cost of the annual fee,” advises Wastell.

The Impact of BNPL Services

According to the most recent consumer survey conducted by Mozo^ 54% of Australian credit card holders also have a BNPL account, so there could be a significant amount of debt that exists we are not able to see in the RBA retail payments data.

Although BNPL services do not charge interest, they represent a new layer of debt that is not fully captured by traditional credit metrics, and as such this could be the reason behind the reduction in credit card balances accruing interest. 

In the absence of this data, Mozo conducted research earlier this year` to find the average BNPL debt amount. The research showed that the average BNPL user carries $919 in outstanding debt, with some individuals holding up to $1,766 across multiple accounts.

How much debt do Aussie BNPL holders have?

“This growing BNPL debt highlights the need for better tracking and regulation. Even without interest, BNPL services contribute to consumer debt, and as their popularity increases, so does the importance of monitoring this debt,” Wastell says.

* RBA Retail Payments Data June 2024 (released August 2024)

` Mozo commissioned a nationally representative survey of 2,554 Australians, aged 18 years and over, from 12th January to 2nd February 2024.

^ Mozo.com.au commissioned a nationally representative survey of 2,129 Australians aged 18 years and over, with information collected between 19 July and 5 August 2024  via Researchify.