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Monday 14 January 2019

Credit cards out of vogue

Peak credit card?

I stopped Tweeting credit card statistics a long time ago - too many inane and energy-sapping comments and people unable to see beyond their own narrative.

That is Twitter, what the hell am I saying?

Whatever, an unexpected reprieve today, as it's been a quiet start to the week and there were a few interesting points of note!

Unusually for Australia, the number of credit card accounts has actually declined to under 16 million, as more Aussies opt to cut up their cards.

The big drop at May 2018 was due to a change in data collection coverage, so that's nothing to get too aroused over, but since then there has been a steady decline of about 86,000 accounts (click to expand graphics):

Although credit card debt overall has moderated, the 'average' balance per card has increased simply because there are fewer credit card accounts than there were 18 months ago. 

There was no sign of a slowdown in total card transaction levels, indicating healthy levels of consumer spending, but credit card balances accruing interest have certainly eased in recent years. Indeed, in per capita terms, balances accruing interest are well down.

During periods of more elevated household financial stress (2007-8, 2012) than we have seen lately ~38 per cent of credit card limits were used, but we are now down to ~34 per cent.

Cards in the blender

The annual decline in credit card lending was the greatest in more than a dozen years - though this was more than offset by more consumers opting for debit cards and spending that way instead - while the number of credit card accounts has been in outright decline.

Overall, less credit card usage may be about what you'd expect to see with the trend unemployment rate of 5.1 per cent now at the lowest level since July 2011.

More consumers are also undoubtedly finding that tight mortgage lending criteria make holding spare credit card accounts more trouble than they're worth, while new regulations will additionally require that consumers prove they can repay the credit limit within a 36-month timeframe. 

Perhaps there's a bit of the Barefoot Investor effect kicking in as well, with a bit of that evil plastic ending up in the kitchen blender.

Quite possibly it's due to a combination of all of the above. 

Good to see!