Credit card use plunges amid COVID-19 economic uncertainty

author-avatar By on July 08, 2020
Credit card use plunges amid COVID-19 economic uncertainty

Photo by Arturo Rey on Unsplash

Millennials are limiting their credit card spending more than any other generation since the COVID-19 pandemic, new research reveals.

The COVID-19 pandemic has changed spending behaviour, with nearly half (48%) of millennials spending less on their credit card compared with 36% of cardholders above the age of 40.

The research from global analytics firm J.D. Power found that nearly one-fifth (18%) of millennial cardholders say the overall value of their card has decreased since the start of COVID-19, compared with 11% of cardholders aged 40 and over.

As a result, 37% of millennial cardholders have already opened or plan to switch to a card with a better rewards program.

Need somewhere to store cash and earn interest? The table below features introductory savings accounts with some of the highest interest rates on the market.

Provider
Total
interest
rate p.a.
Intro
interest
rate p.a.
Intro
term
Base
interest
rate p.a.
 
Online Saver
1.55% 1.20% 4 months 0.35% Go to site
1.75% 1.75% 4 months 0.00% Go to site
2.20% 1.40% 4 months 0.80% More details
2.00% 1.45% 4 months 0.55% More details
2.00% 0.65% 4 months 1.35% More details

*Data accurate as at 07 August 2020. Rates based on a savings balance of $10,000. Sorted by total interest rate. Refer to providers' websites for bonus rate conditions. Note that the base rate will apply once the introductory term has passed.

Head of banking and payments intelligence at J.D. Power Australia Bronwyn Gill said credit card providers need to continue offering competitive rewards programs or risk losing millennials as customers.

“Millennials are savvy and are shopping around for a card that offers a better rewards program that suits their changed spending habits," she said.

"Card issuers must offer reward programs that are relevant to millennials, or risk losing longer-term relationships with this important age group."

The research also found that millennials have a higher intention to switch cards than any other age group.

More than one-fifth (22%) of millennial cardholders say they intend to switch from their current primary credit card to another one in the next 12 months, double that of cardholders over the age of 40.

The main reasons millennials want to replace their credit card are for a better rewards program (29%) and for better benefits (29%).

Cash-related rewards are the most favoured reward type, with 27% of millennial cardholders preferring cash rewards/cashback, 23% gift certificates/gift cards/vouchers and 17% prefer airline miles.

“Rewards programs are key for millennials," Ms Gill said.

"After convenience, earning rewards is the second most important reason as to why millennials use their credit card, however new spending habits are directly influencing the ability to accumulate and redeem rewards."

Credit card debt tumbles during COVID

Australians wiped off record levels of credit card debt in May, according to Reserve Bank (RBA) data.

According to the latest RBA credit and debit card data, Australians wiped $1.64 billion off their credit card debts in May, marking the biggest monthly decrease on record and bringing the national total credit card debt to its lowest level since 2007.

But earlier data suggests that many Australians paid down their credit card debt by withdrawing money from their superannuation.

Data compiled by credit bureau illion and AlphaBeta shows that 14% of money withdrawn from super early was used to repay personal debts, including credit cardsbuy now pay later bills and other bills.

On average, those who used the scheme spent $2,855 in the first fortnight after withdrawing their super, and $393 of that was spent on debt repayments.

The RBA data showed that Australians spent $5.82 billion less on their credit cards in May 2020 compared with the same time last year. 

Data from specialist retail banking and payments consultancy McLean Roche shows that spend on credit cards was down 26% in May following a 33% decline in April.  


Latest Articles

author-avatar
Emma joined Savings.com.au as a Finance Journalist in 2019. She is a journalist with more than five years experience across print, broadcast and digital media, with previous stints at Style Magazines, 4ZZZ radio, and as editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of young women and millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand. When she's not writing about finance she's watching Greys Anatomy (again).

Get free insights & tips monthly

By subscribing you agree to the Savings Privacy Policy

Loading data please wait...

{{returnData.productName}}

Overview

Current Rate

{{returnData.currentRate | percentage:2}}

Comparison Rate*

{{returnData.comparisonRate | percentage:2}}

Rate Type

{{returnData.rateType}}

Advertised Rate

{{returnData.advertisedInterestRate}}

Comparison Rate*

{{returnData.comparisonRate}}

Monthly Repayment

{{returnData.monthlyRepayment}}

Interest Type

{{returnData.interestType}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Bonus Interest Rate

{{returnData.bonusInterestRate | percentage:2}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Introductory Rate

{{returnData.introductoryRate | percentage:2}}

Introductory Term

{{returnData.introductoryTerm}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Term

{{returnData.term}}

Advertised Interest Rate

{{returnData.advertisedInterestRate | percentage:2}}

Interest Frequency

{{returnData.interestFrequency}}


Fees and Features

Ongoing Annualised Fee

{{returnData.annualFee}}

Upfront Fee

{{returnData.upfrontFee}}

Offset Account

Redraw

Principal & Interest

Interest Only

N/A{{returnData.interestOnly}}

Max loan to value ratio (LVR)

{{returnData.maxLVR | percentage:0}}

Lump sum repayments

N/A

Additional repayments

Maximum Loan Term

{{returnData.maximumLoanTerm}}

Upfront Fee

${{returnData.upfrontFee}}

Ongoing Monthly Fee

{{returnData.ongoingFees}}

Early Repayment Fee Applies

N/A

Vehicle Types

{{returnData.vehicleType}}

Maximum Vehicle Age

{{returnData.maximumVehicleAge}}

Pre Approval Available

N/A

Online Application

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Minimum Deposit

{{returnData.minDeposit | currency : '$' : 0}}

Upfront Fees

{{returnData.upfrontFee | currency : '$' : 0}}

Annual Fees

{{returnData.annualFee | currency : '$' : 0}}

Notice Period to Withdraw

{{returnData.noticePeriodToWithdraw}}

Online Application

N/A

Automatic Rollover

N/A

Maturity Alert

N/A