Ozzies push their cards to the limit - and beyond

According to a new survey of 2,000 Australian consumers conducted by independent market analyst Datamonitor*, almost a quarter of credit card customers admit to sometimes buying items they can't afford with their card. In addition, although most consumers use their credit prudently, 9% of card customers admit to only managing the minimum payment each month. This corresponds to one million Australians.

Petter Ingemarsson, Financial Services Analyst at Datamonitor, comments “Most Australians are financially savvy, but a minority are tempted by the easy availability of credit.”

Some credit card customers are prone to overspending

Although most Australians use their credit cards prudently and responsibly, almost a quarter of respondents in the Datamonitor survey admit to sometimes using their card to purchase items they can't afford.

As consumer credit has become easily available, and as credit card limits have risen over the last few years, some are concerned that consumers are being tempted to overspend, with January often the month when customers face the results of this on their bills following Christmas shopping sprees. When asked how respondents felt about their credit limit, 8% of Australian credit card customers in the survey thought their credit limit was too high because it tempts them to overspend.

Australian credit card providers thus need to be careful selecting who to offer credit, and be transparent in communicating associated costs.

Most Australians use cards primarily as payment tools

The majority of Australians use cards as payment tools rather than as instruments to borrow money. Most cards offer interest free periods and the opportunity to avoid paying interest on purchases made. In the Datamonitor survey, 39% of credit card customers never pay interest on their credit cards, and a further 18% only pay interest rarely.

However, a significant proportion regularly revolve their credit card balance, as 18% of consumers report paying interest every month. Over 9% of surveyed Australian credit card customers only manage the minimum required payment each month, corresponding to one million Australians. These are the customers that are more likely to have problems managing their credit card debt.

Credit card fees drives choice of provider

When asked for the most appealing factors when choosing a new card, over 86% of Australian credit card customers questioned in the survey mentioned lower fees. Only 47% mentioned an attractive reward program as a factor when choosing a new card, while 54% mentioned attractive interest rates.

Over the last few years, Australian credit card reward programs have become less generous, and as a result, customers have become more mindful of credit card fees. In the survey, 43% of credit card customers feel that their reward program fails to make up for the annual fee on their card. In contrast, only 20% feel that their reward program does make up for the annual credit card fee.

Low-fee cards are thus expected to continue to play an important role in the Australian card market.

* The Datamonitor Australian Financial Services 2007 Survey was conducted in December 2007, gathering responses from 2,000 Australian consumers aged 18 and over. A range of qualitative and quantitative questions were asked regarding the respondents' financial situation.