Credit card cash advances dying out

A secular shift in the use of credit cards as a tool of household finance may be underway, with a decline for the fourth consecutive month in the value of credit card balances in October. This is the first such run of declines in this measure of the credit card market since the Reserve Bank of Australia began collating the data in 1985.

The average rate of growth in balances, on a 12-month basis, has dropped for 10 months in a row.

One factor in the decline in balances is the reduced use of cash advances. Over the last year cash advances represented 4 per cent of the value of monthly transactions on credit cards, down from around 7 per cent of transactions five years ago (close to twice the ratio in the late 1990s).

Another is the declining use of credit cards as a payment tool, as households switch to debit cards or other methods including cash. The RBA put the market share of debit cards, as a percentage of the wider payment card market, at 39.1 per cent in October 2011, up from 33.8 per cent three years ago.

Source: Banking Day

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