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CREDIT CARD SPENDING AND REPAYMENTS OVER THE HOLIDAY PERIOD
Sydney, 12 December, 2007: The Australian Bankers’ Association (ABA) is reminding bank customers to give some thought to their financial position before taking on increased spending over the Christmas and holiday period.
David Bell, Chief Executive of the ABA, said: “It is important to understand that any increased spending on your credit card will either need to be repaid or will accumulate. Completing a budget and understanding your financial situation is an important step in having a good Christmas and holiday period.”
It is pleasing to note that in recent years, the official data shows Australians have been managing their credit card spending and repayments over the Christmas and New Year holiday period.
Mr Bell said: “Reserve Bank data shows that Australians are prepared for this period. For example, it is not well understood that while credit card spending increases in December, repayments also increase significantly in the same month.”
Over the past three years, Australians have repaid more on their credit card than they have spent over the two months of December and January combined.
This is demonstrated in the chart below which shows the ratio of repayments to new spending for the combined months of December/January over the past ten years. Where this ratio exceeds 100%, this means that repayments have exceeded new spending – this has occurred in 2003, 2005, 2006 and 2007.
Last year, by the end of December/January, credit card holders had repaid $726 million more than they had spent. That is, card holders spent $32.8 billion and repaid $33.5 billion.
However, this is aggregated data; individuals still need to manage their own household budgets.
The Reserve Bank data shows that while spending is always greater than repayments in December, the difference between spending and repayments last year was at its lowest level in six years.
Mr Bell said: “In other words, customers are choosing to spend up in December but have chosen not to leave as much carrying over into January. They are now repaying more in December than they used to.”
The ABA said the vast majority of Australians handle credit well but when taking on more debt, always give some thought to how you would manage if your income was interrupted for a while or if you lost your job. Unforeseen change in personal circumstances such as unemployment, illness and family break-up are the major causes of financial difficulties with repaying card debt.
Mr Bell said: “If a bank customer is having trouble repaying a debt, the most important step is to contact your bank and let them know you have a problem and that you want to sort it out. If the bank is notified sooner, rather than later, where possible they will be in a better position to work with you to arrange a solution.”
For further information:
Heather Wellard
ABA PR
Ph: 02 8298 0411
Mobile: 0409 830 439
ENDS
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