Credit card spending increased in December amid Aussie cost of living crisis

Credit card activity increased in December as the number and value of purchases on personal credit cards rose annually, according to newly released credit and charge card data from the Reserve Bank. 

The number of purchases on personal credit cards in December 2023 rose by 4.49% when compared to December 2022, taking the total number of purchases up to 284.7 million. At the same time, the value of those purchases increased by $1.24 million or 4.95% annually to hit $26.25 billion in December.
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Prepared by www.canstar.com.au. Data source: RBA Credit and Charge Card Statistics, Dec-2023. All values are in seasonally adjusted terms unless otherwise stated, in which case statements about trends should be made with caution.

While the figures rose annually, month-on-month there was a modest decline as pre-Christmas spending likely shifted to November when Black Friday and Click Frenzy sales enticed new purchases.

The disturbing feature of December’s credit card spending statistics is that more of Australians’ spending is going onto cards, which may signal a future problem says Canstar’s finance expert, Steve Mickenbecker.

“Spending on personal credit cards in December remained up over the year in spite of the modest decline of 1.31 percent in spending on cards compared to November, which can be put down to the changing spending pattern as shoppers have brought forward their holiday purchases,” says Mickenbecker.

“The disturbing feature of the RBA credit card statistics is that cards are now funding a higher proportion of Christmas spending. This has to reflect just how tough households are finding the impact of 13 interest rate hikes and other cost of living pressures.

“The value of December’s credit card spending is 1.31 percent down for the month compared to a 2.7 percent fall in retail sales in the same period. The difference is even starker over the year, with credit card spending up almost 5 percent while retail sales rose just 0.8 percent. More of what Australians are spending is going onto plastic.

“We are back at work now but Christmas 2023 won’t be forgotten for quite a while by the many Australians who will be paying it off over 2024.

Debt accruing interest eases in December but a spike could be around the corner

Credit card debt that is accruing interest charges and adding to cost of living pressures dropped by 0.37% annually in December but there was a small 0.12% uptick from the month prior with a total of $17.31 billion now occurring interest charges.
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Prepared by www.canstar.com.au. Data source: RBA Credit and Charge Card Statistics, Dec-2023. All values are in seasonally adjusted terms unless otherwise stated, in which case statements about trends should be made with caution. ^Assumes 38% of personal credit card accounts are revolving a balance and therefore accruing interest, based on the Canstar 2022 Customer Satisfaction Survey (n=4936).

The monthly rise, albeit very modest, in debt levels could be a sign of what’s to come with Christmas and summer holiday credit card spending likely to flow through to debt levels in January, warns Canstar.

“The combination of mounting living costs, higher mortgage repayments and rents, coupled with Christmas and summer holiday spending could prove too much for many in the early months of 2024,” says Mickenbecker.

“The level of debt accruing interest on credit cards is yet to rise considerably, up 0.12 percent for the month while down 0.37 percent for the year, but the total balance on personal cards is $757 million higher than a year ago and a good part of that is likely to start incurring interest as Australians work to pay it off.

“The holiday season is rarely a time for debt reduction and even though we have not seen a blowout in December, we are expecting debt incurring interest to rise next month as Australians return to work.

“Canstar’s research shows the average balance accruing interest per card is sitting at $3,598. Someone making only the minimum repayments on this balance with an average purchase rate of 17.07% could spend almost 25 years repaying the debt.

“High interest rate credit card debt can build up quickly if not managed, making it critical that Australians budget to drive down their debt as quickly as possible and cut back on future card spending.

“Anyone who has put Christmas and summer holiday spending on their credit card and is struggling to get on top of it could consider moving their debt to a card with a zero-interest balance transfer offer as a way to cut the interest bill.

“Balance transfer deals are only beneficial if they are used properly. Cardholders need to curtail spending on the card and pay off enough each and every month to knock off the debt within the interest-free term.”

Top five longest 0% balance transfer offers on Canstar.com.au:
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Source: www.canstar.com.au – 7/02/2024. Based on personal, unsecured credit cards with a 0% balance transfer offer on Canstar’s database. Top 5 selected based on longest balance transfer period. Table sorted in descending order by balance transfer period, followed by ascending order by balance transfer revert rate. *First annual fee waived for existing Westpac customers. 

You can compare credit cards with Canstar to find a deal that might be suitable for you.

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