Are we getting smarter with our credit ????

Savvy consumers shun ATMs, credit cards
Reserve Bank statistics

• Aussie consumers are being increasingly savvy with their finances. Cardholders are using credit cards more often but paying off before the due date. And consumers are avoiding bank fees, preferring to get cash out on their debit cards with retailers.
• Transactions made with debit cards in December were up 10.8 per cent on a year ago, almost three times the growth rate of credit cards.
• The average outstanding balance on credit cards stands at a record $3250.60, up 3.3 per cent on a year ago. The number of purchases made on credit cards hit a record $21.1 billion in December, up 5.6 per cent on a year ago.
• Australians are using ATMs less often to withdraw cash, preferring to get cash out at retailers and other businesses. The number of cash withdrawals made at ATMs was down a record 7 per cent in December while cash-out only transactions with debit cards were up 7 per cent.
• On average each Australian used their debit cards a record 6.4 times in December. And we used our credit cards 10.6 times on average in December, slightly less than the record in December 2004.

What does it all mean?
• It may have been the US financial crisis. Or it may reflect better education. But Aussie consumers are being increasingly savvy with their finances. While consumers left more outstanding debt on their credit cards in December, they are more likely to pay off credit card debt without incurring interest charges or use debit cards instead. Aussie consumers are avoiding bank fees, using their own bank’s ATM or taking out cash at retailers. And credit card customers are clearly not keen on getting cash out on their cards.
• The average outstanding debt on credit cards is growing at the fastest pace in three years, although it still pales with growth rates set in previous years. Overall the average balance on credit cards is up just over 3 per cent on a year ago, but the average balance of cards accruing interest is rising at half that pace.

• An interesting trend is that Australians are using ATMs less often, preferring to get cash out with purchases at retailers. In December the number of withdrawals made at ATMs was down almost 7 per cent on a year ago. Not only was this the biggest drop on record but also the rate of decline has been accelerating since April last year. But cash-out only transactions made at businesses were up by just over 7 per cent on a year earlier.
• In part consumers may be using ATMs less often because of security fears. But the attraction of reduced fees and increased convenience may both be prompting consumers to get cash out when they are doing their shopping.

What do the figures show?
• Figures released from the Reserve Bank show that the average credit card balance stood at a record $3,250.60 in December, up $54.20 on November. The average credit card balance is up 3.3 per cent on a year earlier, the strongest growth in 13 months. And growth of a smoothed measure of credit card debt – the rolling 12-month average has lifted from a 15-year low of 0.5 per cent to 0.6 per cent in December.
• Of credit cards attracting interest charges, the average outstanding balance rose by just $7.40 to $2,303.00. The average balance accruing interest is 1.4 per cent higher than a year ago. The smoothed (rolling annual average) measure shows 1.3 per cent growth in the average balance – the slowest growth on record.
• The number of credit card cash advances fell by 2.7 per cent in November and was down by 15.3 per cent on a year earlier. Credit card advances have been consistently falling in annual terms for 32 months.
• The number of purchases made on credit cards rose by 15.2 per cent in December to stand 4.1 per cent higher than a year ago. And the value of purchases made on credit cars in December was up 5.6 per cent on a year ago.
• The value of purchases made on debit cards (excludes cash out) totalled a record $11.8 billion in December, up 6.9 per cent on a year ago. The number of debit card purchases was up by 11.1 per cent on a year ago.
• The value of all transactions made on debit cards hit a record $14 billion in December, up 6.8 per cent on a year ago. The number of transactions was up 10.8 per cent on a year ago.
• The number of withdrawals made at customers ‘own bank’ ATMs in December was up 3.7 per cent on a year ago. But withdrawals made at ‘other bank’ ATMs was down 19.2 per cent. All ATM withdrawals were down a record 6.9 per cent on a year ago.
• ‘Cash out’ only transactions made with debit cards in December were up 7.3 per cent on a year ago.

What is the importance of the economic data?
• 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 for interest rates and investors?
• The new era of consumer conservatism continues. Aussie consumers no longer blindly put purchases on credit cards, preferring to use their own funds instead. Cardholders also appear to be active in keeping g fee and interest rate charges down, looking for their best options.
• Both banks and retailers must stay on top of the trends in consumer behaviour. Whether it was the US financial crisis that has caused consumers to change behaviour remains to be seen. But with unemployment falling and confidence levels near record highs, the conservatism of consumers is an interesting contrast.
• The Reserve Bank has highlighted the conservative behaviour of consumers. If spending growth remains soft in coming months then the Reserve Bank has more reasons to stay on the interest rate sidelines.


Source Craig James, Chief Economist, CommSec