The Reserve Bank released data that has revealed that Australians are steering away from credit cards, as many people have ditched the plastic.
However, is the dip in credit card customers due to Australians becoming smarter about credit cards, or are we just lacking confidence and trying to steer clear of debt problems? Either way, it’s good news, as household debt has reached its highest level since 1998.
However, while there has been a fall in the amount of credit cards taken out, it seems as though credit card usage is still on the rise. There are approximately 15.45 million credit cards still being used in Australia alone, and the figure has grown by 0.77% in the past year.
However, while credit cards are still in use, it appears we’re all quickly paying them off. In May 2014, the country made 166.3 million purchases – which is worth $22.9 billion in credit card charges; however, this is in comparison to 160.92 million purchases that were worth $22.5 billion in the previous year.
It therefore appears that many of us may be learning from the Australian debt binge of the noughties, which many of us were party to. However, many people believe the new statistics simply prove that consumers lack confidence in taking out a credit card, especially as many Australians have not long found employment, or are still struggling to find a job.
Craig James, the CommSec economist, recently commented: “While businesses are borrowing, investing and employing again, consumers are reluctant to take on debt. This is no more apparent than in the credit card figures released each month by the Reserve Bank”.
According to a new report by Homeloans, many Australians are expected to spend this year’s tax refund paying down their mortgage or credit card, demonstrating that residents are becoming more financially responsible by trying to help clear debts whenever possible.
The survey found that out of the 64% of people that expect to receive a tax refund from the 2013/14 financial year, 21% plan to cut the cost of their mortgage, whilst 33% plan to pay off their credit card debt. The research suggests that Australians view slashing debt as a primary concern, whilst holidays and shopping trips are only secondary considerations.
It’s not just Australians that are becoming more conscious of how damaging credit cards can be, as more Americans are now wary of taking out a credit card.
The US was undoubtedly one of the hardest hit countries during the recession, suffering significant employment problems and an ailing economy. However, the Washington Post has recently reported that 29% of credit card holders have paid off their balances in the fourth quarter of 2015 – which is the highest figure on record since the recession.