According to official Reserve Bank of Australia (RBA) statistics analysed by comparison site RateCity, in November 2019, Australians reduced their balances owing on credit cards to their lowest point in 13 years.
Balances accruing interest on the 13.8 million personal credit cards being used across Australia in November 2019 fell by $2.45 billion in a year, to a total of $27.20 billion.
The figures equate to an 8.26 per cent drop from November 2018 and are 1.12 per cent lower than in October 2019, when balances accruing interest totalled $27.51 billion.
The November 2019 statistic is the lowest figure seen for balances accruing interest since December 2006, according to RateCity.
Additionally, the number of personal credit card accounts held in Australia dropped to its lowest level since January 2011.
There were 37,673 fewer personal credit card accounts in November 2019 than the month before (a drop of 0.27 per cent when compared to October), or nearly a million fewer than the same period in the prior year (a year-on-year decrease of 6.43 per cent).
According to the data, in November 2019, the average balance accruing interest per credit card account was $1,963, down 0.85 per cent from October, and 1.96 per cent lower than November 2018.
The figure for total combined credit card limits has also fallen markedly. In November last year, combined credit card limits totalled $132.37 billion, down 0.38 per cent month-on-month, and a decrease of 4.74 per cent from the previous year.
The total combined credit card limits figure was also the lowest since October 2014.
Paul Marshall, chief executive of RateCity.com.au, said, “While personal credit card debt has been gradually falling for more than a decade, this past year saw balances take a significant dive.”
“Australians have cleared $2.45 billion in debt accruing interest, which is huge, considering we cleared just $675 million in the year before,” he said.
Mr Marshall suggested that as home loans have become cheaper to service, many Australians have opted to reduce debt – such as those owed on credit cards – in order to secure a mortgage and buy a home.
“There are several reasons to explain the sharp drop,” he said.
“Some customers are clearing their card debts to help get their home loan approval over the line. Others are getting credit card applications knocked back, thanks to tougher regulations.”
However, Mr Marshall said the “biggest factor at play” in the movement away from a reliance on credit cards is likely to be due to the rise of buy now, pay later services, which increase pressure on credit card providers.
“[Buy now, pay later services] are seeing exponential growth and no sign of slowing,” he said.
“Credit card providers are responding with offers of rewards points and cashback, as well as low rate options, but it’s unlikely to be enough to win back the masses.”
[Related: Aussies continue to increase saving habits]
Hannah Dowling is a cadet journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.
Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency.
Hannah graduated from Macquarie University with a Bachelor of Media and Journalism.