Half a Million Australians Leave Debt, Credit Card and Personal Loan Use ‘Declines’
According to Equifax, around 500,000 Australians have reduced their credit card and personal loan debt with quick access to their super.
In the past 18 months, many Australians have given up on credit cards and personal loans, according to research from global data, analytics and technology company Equifax.
From January 2020 to July 2021, total credit card and personal loan debt fell 13.2% to $ 20.9 billion, demonstrating a “steady decline” in personal loans and credit cards generally.
The average individual’s debt fell 8.4%, or $ 1,400, despite the financial hardships many people faced throughout the pandemic.
This appeared to be in part due to the Early Super Access Scheme according to Equifax, which was available from April 2020 to January 2021, which allowed Australians to make emergency super withdrawals.
The “spike” in closed unsecured accounts (credit cards and personal loans) correlates with the program schedule according to Equifax analysis.
Kevin James, managing director of consulting and solutions, Equifax, said there was “no doubt” that the super early access program had had a significant effect on the retirement pension market.
“Our data shows that closed unsecured accounts peaked in the first three months after the program took effect, likely accelerating the trend we are already seeing in this space,” said James.
“Australians have used these emergency funds to bring their finances under control by paying down personal debt, rather than increasing their discretionary spending as some originally feared.”
Young Australians are ditching credit cards to buy now and pay for services later
According to Equifax, mortgage borrowers are less likely to have a credit card, especially those under the age of 30.
The decline in cardholders under 30 was 24%, compared to a drop of 12% for those aged 30 to 40.
“While we’ve been watching the shift from credit cards to Buy Now, Pay Later for some time, especially among younger consumers, the pandemic has accelerated the decline of credit cards for rainy days,” he said. Mr James said.
“It is encouraging to see that Australians have taken positive steps to pay off their debts, avoid credit traps and improve their financial health. We expect this trend to continue.”
This is supported by new research from DBM Atlas and Nielsen who revealed that over 1 million Australians have canceled credit cards in the past year in favor of interest-free payment options.
Credit Card Limits Remain ‘Stable’ As Personal Loan Limits Rise
The number of Australians with multiple credit cards is “steadily declining”, with many preferring to “streamline” their options by closing additional cards.
It also contributed to the decline in credit card use throughout the pandemic according to Equifax.
Despite the decrease in usage, the average credit card limit remained stable at $ 8,700 for newly opened accounts.
On the other hand, the average limit for personal loans increased from $ 16,300 in January 2020 to $ 19,400 in July 2021.
Equifax said this was likely attributed to the “strong” used car and home improvement markets.
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