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Man using credit card - Source: ONE News
People who are wary of accumulating personal debt are increasingly using debit cards to control their finances.
Financial services group Canstar Cannex senior financial analyst, Harry Senlitonga, says debit card usage in Australia has increased at a greater rate over the past year than use of credit cards and electronic funds transfer point-of-sale (EFTPOS) facilities.
Debit card transactions increased by 39% in the year to November
2009, while credit cards were up by 14.9% and EFTPOS rose by
12.45%, Reserve Bank of Australia (RBA) data shows.
Senlitonga says debit cards have become more widely available in
the past two years, with all the major banks now offering the
product.
"A debit card can be used over the internet, it can be used over the counter when you are overseas and some people like it because it is not a credit card, you are using your money," Senlitonga said.
"Some people see it as the best of both worlds as it has the same acceptance as credit cards."
Consumer body Choice spokesman Christopher Zinn says debit cards make a lot of sense for people into online transactions and various other arenas.
"Also, it is not taking you deeper and deeper into debt and it is more controllable for some people," Zinn said.
CommSec economist Savanth Sebastian says people are more wary about adding too much to their personal debt after moving away from credit cards during the economic downturn.
"That era of consumer conservatism is here to stay, at least for the next year," Sebastian said.
"Excessive debt will be shunned."
Sebastian said despite a solid increase in credit card usage in November, growth in credit cards was unlikely to explode until the local economy had improved significantly.
The increase in total credit card balances was 4.2% in November, while growth in the average credit card account balance rose by 1.8%, RBA data showed.
Growth in average balances on credit cards over the year to November 2009 was 1.7%, compared with an average annual rise of 5.8% over the preceding five years.
"It is more likely to track sideways over the next few months and you might just see these incremental increases as the economy recovers and retail sales start to strengthen," he said.
"Debit cards will be the card of choice over 2010."
