Credit card debt plummets 10% over 12 months

Photo by Tim Gouw on Unsplash

Australians are clearly working hard to pay off their credit card debt, according to the latest Reserve Bank data.

The Reserve Bank of Australia's (RBA) Credit and Charge Card data for December 2019 released today shows a 10% decline in balances accruing interest on credit cards from December 2018. 

Credit card debt fell from $31.6 billion to a near-13-year low of $28.5 billion (seasonally adjusted), with there being a 1.5% drop in debt over just one month (November to December) alone. 

The current levels of credit card debt are a far cry form the all-time high of just under $37 billion seen in October 2011, as credit card holders are clearly taking steps to pay off their balances on time.

Repayments have increased by 0.85% month-to-month and nearly 4% year-on-year. 

December's results follows a trend also seen in November, which also saw debt levels fall. 

Card purchases down in dismal December for retailers 

The number of purchases made with credit cards over 12 months is actually up by nearly 5% year-on-year, indicating that perhaps the typical credit card user now is a bit more sensible with what they buy. 

There was, however, a rather sharp decline in usage from November to December. 

The number of credit card purchases fell 0.91% month-to-month (seasonally adjusted), with 252.5 million being made. 

These December figures are in line with reports of a retail slump over the Christmas period.

Retail turnover fell by 0.5% in December according to figures from the Australian Bureau of Statistics (ABS).

This was worse than the 0.2% decline that was anticipated, with results were mainly attributed to: 

• The bushfires which were at their peak during December 
• Black Friday and Cyber Monday sales, which took Christmas shopping into November instead of December 
• The 'Amazon effect', where customers do more shopping online 

The rise of buy now, pay later (BNPL) has also been linked to the slowdown in credit card spending, with the likes of Zip reporting record quarterly growth. 

The value of credit card purchases remained relatively stagnant over the month, but there was also a 4.36% rise from December 2018. 

More accounts shut down 

Aussies are continuing to close their credit card accounts, as the RBA's data reported another fall of 0.4% in the number of active accounts from November to December. 

This takes the number of active accounts to 14.6 million, while there are 20.1 million active credit cards - that's about 1.4 credit cards per account. 

Year-on-year, the number of active credit card accounts has skydived by nearly 8%.

The record number of accounts stood at 16.7 million in May 2017: 12.5% more than now. 

Other key credit card stats 

The RBA's monthly credit card stats are extremely comprehensive, and the numbers reported so far aren't the only ones worth talking about. 

Some other key tidbits hidden away among rows and rows of numbers are: 

• Cash advances are down 13.7% year-on-year
• The value of cash advances are down nearly 17% since December 2018
• The number of overseas purchases is up 9.5% year-on-year and 4.8% month-to-month 
• The average credit limit has fallen 4.8% year-on-year to sit at $9,847

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