Credit cards to be used for bill repayments by 49 per cent of Australians: Survey

Monday February 8, 2010

Recent credit card industry figures report that many Australians, while hesitant when it comes to budgeting and managing their finances, are planning to use their credit cards to pay off major household bills. In fact, 43 per cent or four in ten Australians stated that they expect to use a credit card to pay for otherwise unaffordable expenses over the next few months with one third of Australians concerned about the amount of money they spent over the Christmas holiday period.

The Dun and Bradstreet's Consumer Credit Expectations Survey has released results grading and assessing Australian's finance status and plans when it comes to credit spending habits, debt performance and savings accounts for the March 2010 quarter. The results showed that certain demographics are in far greater financial difficulty then others based on their intended financial spending and savings activities.

Dun and Bradstreet's survey results include:

• 18-34 year olds and those families with children are reporting financial positions that are worse than during the height of the credit crisis
• 56 per cent of young people predict the use of their credit card to pay for otherwise unaffordable expenses during the March quarter 2010 with those aged 35-49 and 50-64 reported figures of 39 percent and 33 percent respectively
• just under 50 percent of families with children reported that they predict the use of credit in the next few months, an increase of 8 per cent from the last survey, while 39 per cent of households without dependents reported the same prediction
• when it comes to plans to make major purchases over the next three months, all demographic reported figures around the 30 per cent mark for those intending to make a major purchase on their credit card

The impact of Christmas has also been felt considerably with two demographics reporting significant concerns when it comes to repaying credit cards from the November/December period. Families with children and18-34 year olds have reportedly used their credit cards throughout the Christmas period, 52 and 44per cent respectively, and are now highly concerned with rising interest rates and the effects of late repayments.

It was not all bad news however, according to Dun and Bradstreet's CEO Christine Christian who stated that these financial sentiments are signs of the recovering economy and for Australians not to place too much financial stress on themselves.

"Given the pressure that the global credit crisis placed on families' finances over the previous 12-24 months, it's not surprising to see that certain demographics are now struggling under the weight of their spending ," said Ms Christian.

Although it was noted that these trends may signify a recovering of the economy, they also are a source for some concern when considering the impending funding costs that will rise throughout 2010 with interest rates and the activities of the Reserve Bank and the major banks.

"Further increases in the cost of credit for those groups already under pressure could trigger an irreversible spiral into serious debt troubles."

"Australians are demonstrating significant intentions to spend in the March quarter, which bodes well for our nation's economic recovery," said Ms Christian.

"However, the groups with the greatest intent to spend are also the groups that are demonstrating signs of financial stress. This indicates that default risk will remain prominent for credit providers in the months ahead.

"It also suggests that certain demographics could find themselves in further trouble later in the year. Interest free deals and credit cards are effective finance products if they are used correctly. However, they can be a trap for consumers if they find themselves unable to pay back the funds when the interest free period expires."

When it comes to those expecting to expand the number of credit cards to their name, it was those with children or dependents that are far more likely to order a new card in addition to younger Australians, sparking predictions for future credit card debt trends. In fact, results showed that 30 per cent of respondents that were families with children said they intend to make an application. This is five percentage points higher than those without dependents although it was the 18-34 demographic that leads the charge with a significant 43 percent saying they intend to apply for new credit while 26 per cent of that same demographic intend to apply for a limit increase in the March quarter.

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