For years we have been warned, lectured, and frightened by the likes of Choice, The Sydney Morning Herald, The Age and other media about the ills of credit cards and how the size of our plastic debt would come to cripple us (along of course, with the size of our home loans).

Recession would make the problems worse, so it’s of interest that Australian consumers are proving once again they are cleverer than the handwringers give them credit for. They seem to be making some noticeable changes in the use of their credit cards, increasingly substituting debit cards or using EFTPOS with credit cards to pay for purchases instead of charging them to their accounts.

Car charges and outstanding balances have started dipping, while card users seem to be noticing the improved transparency of fees on so–called foreign bank ATMs (not your own bank in other words) and cutting the use of these other ATM’s to get cash advances.

Credit card use does bounce around from month to month and there are season highs (December) and lows (January-February when the Christmas bills come in), but the April figures show quite noticeable changes in behaviour by users.

Reserve Bank figures yesterday revealed that credit card balances fell in April for the first time since records began 14 years ago. The average balance on a credit card declined by an annual 1.2% to $3,080 in April — the first fall since records were kept more than 14 years ago.

Total credit and charge card balances outstanding fell by 0.6% to $44.073 billion, from $44.358 billion and balances accruing interest fell to $32.345 billion in April, from $32.689 billion the previous month.

Actually the amount owing on our cards (including balances) has been falling now since peaking in the early months of this year at $44.799 billion in February. That’s a fall of 1.5%, small but indicative of the more conservative approach to card use that the economic slowdown seems to have produced.

Falls in the balance outstanding from December to January are normal, but in February this year it build to the all time high figure, and has been falling over the past two months to be down by around $700 million.

A year ago there was a rise of near $600 million in outstanding balances from March to April. Total credit and charge card balances outstanding had risen by just 2.3 per cent over the year to April, much slower than the average rise of 12.6% over the preceding five years.

Total EFTPOS purchases fell to 157.76 million worth $10.859 billion in April, compared with 157.478 million worth $11.045 billion in the previous month.

The value of EFTPOS purchases rose by 16% over the past 12 months, compared with an average of 12.5% over the preceding five years. That’s because debit cards are becoming more popular (and starting to replace some of the credit purchases at supermarkets and other outlets).

And the move by the Reserve Bank to force down bank fees and improvement disclosure seems to be showing up. Figures for cash withdrawals, show a fall in “other ATM transactions” in the year to April and a rise in own bank transactions as people realise there’s a fee involved (which is disclosed on the ATM).

As well, the RBA said consumers collectively spent $17.3 billion, or 7.5% less, on their credit cards in April than in March when card spending rose 9.6%. Credit repayments fell by 7.9% to $18.168 billion in April after increasing by 17.5% the month before.

Cash advances on credit cards fell 10.9% to 2.377 million in April, a 11-year low, and the value of cash advances dropped to $895 million (down 13.5%), its lowest level since October 2004.

The number of credit and charge accounts increased by 54,000 in April, while the number of purchases using credit cards fell by 5.3%.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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