Aussies repaying more on cards than they're spending, RBA says

By Vanessa Tripodi

In October 2009, Australia was the first Western country to raise interest rates after the global financial crisis. This was the Reserve Bank of Australia reinforcing what we'd been told for months -- the Australian economy is well on its way to recovering from the meltdown. After 19 months of interest rate cuts and holds, Australians were shocked to see the rise, but interest rates are not the only positive indicator of the country's financial health.

An RBA report to Parliament just weeks after their interest rate rise also showed that Australians were repaying more on their credit card balances than they were spending. The RBA found this was not a new or isolated trend either, with credit card repayments consistently exceeding transactions each month since the end of 2008 -- and often by significant amounts. According to the Reserve Bank, this trend represents the increasingly cautious approach of many Australians towards credit card spending and responsible spending in general.

This is also shown in the October report, as the RBA discovered that even though Australians were spending less on their credit cards, they were still working hard to stimulate the economy. They were just doing it in a more responsible way, by using their debit cards instead. With a 1.5 percent drop in Australians' use of credit cards in August 2009, the use of debit cards surged ahead. For example, where credit card transactions rose 3.8 percent in 2008-09, debit card transactions rose 14.7 percent. Even when the government released its stimulus packages and payments, Australians didn't use this boost as license to up their credit card balances -- they instead kept to using their debit cards. In 2008-09, debit cards accounted for 31.8 percent of all non-cash transactions in the retail sector, where credit cards held just 24.4 percent.

In fact, since January 2009, Australian credit card users have been feeling confident with their spending; from January to February credit card spending increased from $16.662 to $17.135 billion, and from February to March, it increased another 9.7 percent. At the same time, Australians were still keeping their spending under control as credit card balances fell 1 percent from February to March 2009 and repayments increased 11.6 percent.

So, it seems that the RBA's decision to lead the way in interest rate rises was truly based on the fact that Australians have proven how responsible they are with their money, especially in times of financial crisis and uncertainty. Australian credit card holders consistently pay more in repayments than they are spending each month, and this trend is likely to continue as the economy grows stronger and more confident.

Article by Vanessa Tripodi

Published: November 5, 2009