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Australian Consumers Drive The Future Of Credit Card Pricings

Fuseworks Media
Fuseworks Media

Australian credit card issuers may face threat to their business due to the recent shift on consumer attitudes towards credit card debt.

Datamonitor's latest research on 'Australian credit card customers' reveals that Australian consumers have made a greater effort this year to repay their credit card debt in full. Indeed, 48.43% of consumers surveyed this year reported that they never paid any interest in the last 12 months, while a similar figure in 2009 and 2008 was 40.23% and 39.07% respectively.

"This is a staggering 8% nominal increase compared to last year, with nearly half of Australians did not pay any interest at all in the last 12 months" says Harry Senlitonga, senior analyst at Datamonitor and author of this research.

The global financial crisis has led to this shift in behaviour in terms of how consumers repay their credit card debt.

"This year is a year of recovery, not just for the global economies, but for many Australians who were impacted by the crisis. We have seen that consumers are not just becoming more price conscious, but also more savvy than before in searching and using their credit cards," says Senlitonga, based in Sydney.

On the other side, this significant shift in consumer attitudes toward credit card repayments means a potential loss of revenue for Australian credit card issuers, in the form of lower interest income which may impact the profitability of a provider's portfolio in the long term. Datamonitor also believes that the six-consecutive Reserve Bank of Australia (RBA) rate increase between October 2009 and May 2010 have played a strong role in this change on consumer attitudes.

If this trend continues, Datamonitor expects that there will be a number of major reviews of credit card prices carried out across the industry. As part of such reviews, Financial Services providers in Australia may consider a fee-income model as more stable and yet still profitable.

"Arguably, the increasing cost of funding and combined with the uncertainty caused by a shift in consumer behaviour has shaken the fundamental business model for some credit card issuers. Credit card issuers should see these changes as an opportunity to innovate, especially to design some products to target specific consumer segments" concludes Senlitonga.

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