AUSTRALIANS’ love affair with credit cards is waning as people switch to using cash and debit cards.
Reserve Bank of Australia statistics show credit card use has dropped almost 17 per cent in the past five years and now accounts for just under 42 per cent of all card transactions. Debit scheme cards, which are increasingly being offered by banks and credit unions, are the main reason for the trend. This card use has increased more than 30 per cent in the past 12 months alone.
“Debit scheme cards give consumers the best of both worlds; accessibility of a credit card and they allow the consumer to use their own money,” Datamonitor senior analyst Harry Senlitonga says. When it comes to choosing which cards to use, Australians prefer to use their own money, such as a debit scheme card or Eftpos, rather than borrowing on credit, Senlitonga says.
Other factors behind the increase in debit card use are the high credit card fees and interest rates charged. In contrast there is no interest and usually no fees involved with a debit card because the money is being taken from existing savings. If there is no money in the savings account, the transaction will not be accepted.
There are more than 275 million card transactions every month throughout Australia, of which 116 million are attributed to credit cards. Mr Senlitonga says if the trend continues, the credit card market share is expected to fall below 40 per cent.
Consumer group Choice spokeswoman Elise Davidson says one of the biggest moves in the debit card arena recently was by retailer Woolworths. The supermarket and variety store giant now only processes debit cards as an EFTPOS transaction.
Previously, like most retailers, it processed these cards as a credit card transaction. Woolworths has potentially shifted the cost of paying for the transaction from the retailer to the customer. This means debit card customers need to be aware each transaction might be counted towards their monthly Eftpos limit, depending on their bank’s fee structure.
Debit cards are processed by selecting the “credit card” option when paying at the shop counter. But when it is pressed, the retailers are charged a credit processing fee. Now, Woolworths will avoid that fee and the payment will be counted as the customer’s Eftpos transaction.
Consumer Action Law Centre director Nicole Rich says the move by Woolworths and potentially more retailers won’t make any difference to most consumers in their use of debit cards. However, it could mean they will be charged a fee by their bank if they exceed the number of free transactions each month. “You may want to check if your account provides unlimited Eftpos transactions,” Rich says.