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Credit cards feature prominently in the daily spending habits of most Australians. According to Reserve Bank data, almost 13.5 million people currently hold a credit card in Australia.
The reasons for widespread credit card usage are varied. While some people hold it for the convenience, others like to keep one for emergencies, while many find them attractive for their benefits such as cards that help accumulate rewards points or frequent flyer miles.
Below we look at recent trends and talk to a payments expert to gauge how the year is likely to pan out for this important segment of Australia’s payments system.
Related: How Do Credit Cards Work?
Credit Cards: The Year That Was
Credit card usage continued to grow in 2023, albeit at a slower pace than the previous year. According to the latest RBA data for the year to November 2023, total purchases on Australian-issued credit and charge cards rose 5.3%, compared to 13.7% in the previous corresponding period.
Similarly, the number of transactions on credit and charge cards rose 3.8% over that period, compared to 8.4% the previous year.
The trend in the credit card segment was similar to that in the debit card segment, with growth overall but major players, such as Visa and Mastercard, losing market share to a refocused American Express, says Brad Kelly, Managing Director of Sydney-based consultancy Payment Services.
“The trend overall for the issuers is up, but it’s different for different people. Visa and MasterCard are seeing their market share drop and Amex is the winner. The transactions are still increasing, though not as much,” Kelly tells Forbes Advisor.
“The other metric to look at is outstanding balances or the amount of money that people don’t pay off every month. That’s pretty static.”
According to the RBA, the average credit cardholder has a monthly balance of $3019. Overall credit card debt in Australia stood at $41 billion at the end of November 2023, up 2.7% from the previous year.
However, interest is only being paid on $18.5 billion or roughly 45% of the total amount.
Is Credit Card Growth Slowing?
The number of credit cards in Australia has been consistently declining since 2018, with this trend persisting through the Covid-19 years. However, there has been a gradual turnaround since the middle of 2022, meaning the number of cards has since risen to nearly 13.5 million although the rate of increase is now slowing.
Experts say while the amount of transactions we’re doing on credit cards is increasing, these are being generated on fewer cards.
According to the RBA, the average credit cardholder has a monthly balance of $3019
Kelly says the reason for fewer credit cards is not because consumers have moved to ‘buy now, pay later’ providers like Zip and Afterpay, but is more likely a result of tighter reins on credit companies. For example, under the Consumer Credit Protection Act of 2009, providers are not allowed to make unsolicited offers to increase a consumers’ credit limit. Similarly, before issuing fresh credit, credit providers must consider the entirety of the credit facilities available to a consumer and base their decision on their ability to pay off these loans within three years.
“Another factor is that when people apply for a mortgage, the lender looks at all their credit cards and has to assume that they’re all maxed-out even though they may not be fully utilised,” Kelly says.
“People then get rid of a credit card so they can get a bigger mortgage and then realise they don’t need those cards anymore.”
Meanwhile, high fees and charges on credit cards in Australia also contribute to lower usage. Credit cards have an average interest rate of 17.92%. Annual fees also tend to be high, particularly for rewards cards, meaning they are generally worth it only for big spenders or frequent flyers.
How the Cost-Of-living Crisis Affects Credit Cards
RBA data shows the average value of a credit card purchase in Australia currently stands around $104, with the average consumer using their card around 22 times a month.
That figure has remained largely consistent, meaning there has been limited impact of the Reserve Bank hiking its cash rate 13 times since May 2022 on credit card usage patterns.
Kelly says the average dollar figure that people spend has been fairly static for a while. There have been hot spots in certain segments, for instance, supermarkets, which make up 10% of the payments industry, and hospitality, which makes up another 20% of the market.
“But other parts of the market haven’t seen that. If you look at the market overall in aggregate, there’s some lag indicators in there. But the upward trend is probably a bit of inflation and a bit of just overall use.”
But with some shoppers taking advantage of seasonal sales and promotions, credit card debt can easily become a real issue for many borrowers, and is often cited as the biggest concern for Australian consumers.
Related: Will Interest Rates Go Down In 2024?
What Does 2024 Have in Store?
Kelly expects credit and charge cards will continue their upward trajectory, despite a slowing pace. Much of that growth will be on account of American Express looking to boost its presence in the Australian market, to put acceptance of its cards in stores on par with other card providers.
He also expects buy now, pay later providers Zip and Afterpay to evolve into consumer financing businesses this year, offering credit card products, although these will make up just a fraction of the market dominated by traditional providers, Visa, Mastercard and Amex.
Both Afterpay and Zip are likely to use sideways move as a way to clean up their customer base, increase fees and boost regulatory compliance, with buy now, pay later options set to become a feature of these credit cards products in order for the business to survive.
Kelly expects another piece of regulation for merchants, called least cost routing (LCR), to be mandated by the RBA by mid-year, which will help put downward pressure on merchant fees. In addition, surcharging will be allowed for buy now pay later transactions, which experts believe could prompt around half their customers to shift back to a debit card usage.
Read More: Our Pick Of The Best Credit Cards For Australians In 2025
Other Credit Card Trends In 2024
Travel Spending
Travel spending is likely to be a real hotspot for the credit card industry in 2024. With travel showing no signs of slowing down, a number of airlines including AirAsia, Batik Air, Turkish Airlines and Air India are expected to boost service to Australia this year and will need to expand local merchant facilities, Kelly says.
“Also keep in mind that a lot of credit cards offer free travel insurance, so that is a big incentive for people to use their credit cards to pay for travel.”
Meanwhile, travel expenditure is also set to rise across the Australian government, which accounts for the biggest corporate card spending in the country, as well as among corporates.
Fraud Detections
Frauds and scams are likely to continue in 2024 to increase despite improved detection. One of the recent measures to combat fraud has been to slow down transactions on the New Payments Platform (NPP), however this defeats the purpose of real time payments.
Related: Finance Scams To Watch Out For In 2024
Government Regulation
The federal government is expected to bring in further regulation and credit licensing for buy now pay later and other non-banking providers. It has also implemented recent measures, for instance, banning use of credit cards for gambling.
Kelly expects this to have some impact on credit card usage because it will push those merchants to use Pay ID for transactions on the home-grown New Payments Platform (NPP), allowing direct account-to-account payment.
Frequently Asked Questions (FAQs)
Are credit cards dying out?
While the overall trend for credit cards has been gradually declining because of the emergence of alternative payments platforms, they are unlikely to become obsolete anytime soon due to their significant technological advantage and market penetration over decades.
What will replace credit cards?
Payments experts believe the emergence of digital wallets such as Apple Pay, Google Pay and PayPal could provide alternatives for consumers currently using credit cards.
How many years until a credit card closes?
There is generally no limit for a credit card account. While every card comes with an expiry date, in most cases the issuer will renew and replace the card on expiry. It is generally up to the customer to contact the card issuer and get them to cancel the card.
