Growth in credit card use peaks
Analysis of the latest Reserve Bank figures on credit card spending indicates that overall growth has peaked, but a disturbing trend is the increasing indebtedness of higher-risk users, according to analysts MWE Consulting. There has been a downward growth trend in purchases since May 2000, in credit limits since September 2001, and in balances since July 2000. Card spending between March 2000 and March 2001 grew by $16.1 billion, but slowed to $12.7 billion in the year to March 2002 out of a total spend of $85.4 billion.
MWE Consulting says that cards with an interest-free period are showing a lower level of indebtedness, with an average balance of $1,842, but the always-interest-paying segment has an average balance of $3,096. Average balances are over 50 per cent of limits, said MWE's Michael Ebstein, with a significant number of cardholders having used up all available credit. These users are particularly vulnerable to interest rate rises, he said.
Card company Visa says that credit card debt remains only a small component of household debt, however, at 4.3 per cent of disposable income compared with mortgage debt at 69 per cent of income. Credit card interest payments constitute only 0.4 per cent of average weekly household expenditure, Visa says, and its own research shows that those cardholders who do not pay off their debts are not necessarily low-income earners, as has been suggested. Cardholders are not simply “transactors” (pay off balances) or “revolvers” (don't pay off balances), says Visa's Gordon Wheaton. Visa data show that there's roughly a 50-50 split between transactors and revolvers for the majority of the card-holding population across all income groups up to $80,000 a year.