Credit & debit cards
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Credit card debt falls.
Record fall in credit card debt. The average credit card balance fell by 2.7 per cent in smoothed terms in the year to September, the biggest drop in 19 years of records. Use of credit card limits is at 11½ year lows. Usage of credit and debit cards is at record highs. Average fees on MasterCard or Visa purchases have hit record lows.
What does it all mean?
The best way of indicating what the latest cards data means is by first stating the facts:
- The average credit card balance is at four-year lows.
- Usage of credit card limits is at 11½ year lows.
- Consumers are using cash less often – withdrawals from ATMs are down on a year ago.
- The average credit or debit card transaction is around $85.00.
- But credit and debit cards are being used more often – in smoothed terms, at record levels.
- The average fee on a MasterCard or Visa transaction has hit record lows
Aussies are still shopping, but they aren’t keen on going into debt to buy goods. In short, Aussies are living within their means. And that suggests that the Reserve Bank can keep rates lower for longer. It also means that retailers need to keep prices down to entice consumers to buy.
The transformation of the Aussie consumers continues and represents just another form of disruption (game-changer) for Aussie businesses together with technology, China, the Aussie dollar and shifting home preferences.
What do the figures show?
Credit & debit card lending:
- Figures released from the Reserve Bank show that the average credit card balance fell by $10.10 (0.3 per cent) in September to $3,162.60 – the lowest result in almost 4 years (since October 2009). The average credit card balance was 2.7 per cent below a year ago. In smoothed terms (12 month average) the average balance was down by 2.7 per cent – the biggest fall in 19 years of records.
- Of credit cards attracting interest charges, the average outstanding balance fell by $3.50 in September to $2,217.90. The average balance accruing interest is down by 4.4 per cent on a year ago and down by a record 4.9 per cent on a year ago in smoothed terms.
- The average credit card limit rose by $7.40 to $9,102 in September. The average credit card limit rose by just 1.5 per cent in the year to September. Credit card holders, on average, used only 34.7 per cent of credit card limits in August – the lowest rate in 11½ years (since December 2001).
- The average number of transactions on credit cards in September was 10.5, up from 10.2 in August. In smoothed terms the average number of credit card transactions was 10.38 in September – a record high.
- The average number of transactions on debit cards in September was 7.6, down from 7.9 in August. In smoothed terms the average number of credit card transactions was 7.50 in September – a record high.
- The number of credit card cash advances rose by 4.4 per cent in September after slumping by 9.5 per cent in August (value up by 0.2 per cent). In smoothed terms, credit card advances are down 1.1 per cent on a year ago and have consistently fallen in the past five years.
- The number of ATM withdrawals in September was down by 5.4 per cent on a year ago. In smoothed terms, ATM withdrawals were down by 3.4 per cent on a year ago and they have fallen consistently over the past year.
- The average fee on a MasterCard or Visa purchase was 0.81 per cent of the purchase price in the September quarter – a record low.
- The average fee on an EFTPOS transaction was 16.38c in the September quarter, down 1.9 per cent on a year ago.
- The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
- Financial institutions will continue to find it hard to make money from credit cards. Average fees on MasterCard or Visa purchases have hit record lows. The good news is that the conservative posture of consumers may lead to fewer people running into problems with credit card debt.
- Retailers need to offer a variety of payment sources to accommodate more flexible consumers. The downward pressure on prices and margins continues.
Why is the data important?
- The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
What are the implications?
- Financial institutions will continue to find it hard to make money from credit cards. Average fees on MasterCard or Visa purchases have hit record lows. The good news is that the conservative posture of consumers may lead to fewer people running into problems with credit card debt.
- Retailers need to offer a variety of payment sources to accommodate more flexible consumers. The downward pressure on prices and margins continues.
