Australians turn to credit cards as cost of living crisis continues
Spending and demand for credit cards has increased this year, but so has the risk of debt.
Finder analysis of Reserve Bank of Australia data has found the value of purchases made with credit cards reached an all-time high of $34.7 billion in September 2023.
The total value of balances accruing interest also grew to $18.1 billion, a year-on-year increase of 2.4%.
Applications for credit cards have also gone up
It's not just spending and balances that are rising – demand for credit card is also leading to more applications.
"We've seen consecutive year-on-year credit card growth every quarter since Q2 2022," Equifax general manager for advisory and solutions, Kevin James, told Finder in an interview.
The Equifax Quarterly Consumer Credit Insights report for September 2023 revealed that demand for credit cards had increased 6.9% in the second quarter (Q2) of 2023 compared to the same period in 2022.
"Our data also overall credit card limits [have grown] by 16% compared to the same period last year."
James said a number of factors had contributed to the growth.
"Last year, the return of international travel had a positive impact on credit card growth, as consumers returned to using credit cards to earn points and for overseas spending."
He said the cost of living and interest rate rises had also put pressure on consumers for the past 12 months.
"The most recent interest rate rise this month is likely to compound existing stress and have a flow-on impact across the economy."
"We're already seeing signs of financial strain, with arrears rates creeping up across several credit types."
What can you do about debt stress?
If you're paying interest on a credit card, switching to a card with a 0% balance transfer offer can help you save on interest for an introductory period.
Some cards offer up to 32 months interest-free before an ongoing rate applies.
"The increase in demand for credit cards and personal loans this quarter suggests that some consumers are trying to consolidate their debts and keep their finances under control."