An estimated 500,000 Australians cut credit card and personal loan debt, driven by early access to their super, according to Equifax.
Over the past 18 months, many Aussies ditched their credit cards and personal loans according to research from global data, analytics and technology company Equifax.
From January 2020 to July 2021, total credit card and personal loan debt fell by 13.2%, or $20.9 billion, which demonstrates a 'steady decline' in personal loans and credit cards overall.
The average individual's debt decreased by 8.4%, or $1,400, despite the financial challenges many people experienced throughout the pandemic.
This appeared to be partly driven by the Early Super Access Scheme according to Equifax, which was available from April 2020 to January 2021, which gave Aussies access to make emergency super withdrawals.
The 'peak' of closed unsecured accounts (credit cards and personal loans) correlates with the timeframe of the scheme according to Equifax's analysis.
Kevin James, General Manager Advisory and Solutions, Equifax, said there's 'no doubt' the Early Super Access Scheme had a marked effect on the superannuation market.
"Our data shows closed unsecured accounts peaked in the first three months after the scheme came into effect, likely accelerating the trend we were already seeing in this space," Mr James said.
"Australians used these emergency funds to get on top of their finances by paying off their personal debt, rather than increasing their discretionary spending as some originally feared."
Young Aussies shift from credit cards to buy now, pay later services
According to Equifax, mortgage borrowers are less likely to have a credit card, particularly those under 30 years old.
The decline of cardholders under 30 years old was 24%, compared to a 12% decline for those aged between 30 to 40 years old.
"Though we have been observing the shift from credit cards to Buy Now, Pay Later services for some time, particularly amongst younger consumers, the pandemic has accelerated the decline of the rainy day credit card," Mr James said.
"It’s encouraging to see that Australians have taken positive steps to pay their debts, avoid credit traps and improve their financial health. We anticipate this trend will continue."
This is supported by new research from DBM Atlas and Nielsen which revealed that more than one million Australians cancelled credit cards in the past year in favour of interest-free payment installment options.
Credit card limits remain 'steady' as personal loan limits rise
The number of Australians with multiple credit cards is 'steadily declining', with many preferring to 'streamline' their options by closing additional cards.
This also contributed to declining credit card usage throughout the pandemic according to Equifax.
Despite dwindling usage, the average credit card limit remained steady at $8,700 for newly opened accounts.
On the other hand, the average personal loan limit has increased from $16,300 in January 2020 to $19,400 in July 2021.
Equifax said this is likely attributed to the 'strong' used car and home renovation markets.
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