Higher interest rates appear to have taken a toll on consumers with figures showing the pace of growth of credit card debt is slowing. While Australia’s credit card bill hit a record $42.698 billion in December, up from $41.919 billion in November, figures released yesterday show consumers are also being more frugal with their hip-pocket plastic. The total outstanding balance on credit and charge cards rose by 9.5 per cent in the 12 months to December, compared with average growth of 17.0 per cent over the preceding five years, figures from the Australian Bureau of Statistics show.

Craig James, chief equities economist with CommSec, said the average credit card balances were also growing at a slower pace, climbing by just four per cent over the past year. “It’s rising, but it’s rising at the slowest annual pace on record,” Mr James said. “It’s very clear the interest rate hikes have caused people to change their behaviour.” “It shows consumers are certainly taking heed of advice to keep their debt levels in check.”

The Reserve Bank of Australia raised interest rates twice in the space of three months last year in an effort to cool consumer spending. “The (figures) would be quite heartening for the Reserve Bank, that the advice to people to watch debt levels, to ensure they are staying within their means, was being heeded.” Mr James said the interest rate rises, in August and November, had also had a dramatic effect on the way in which consumers used their credit cards. Cash advances, which attract much higher interest rates compared to purchases, fell by 2.3 per cent in value to $1.034 billion in December, from $1.059 billion in November. “We haven’t seen any growth in cash advances on credit cards for over eight months now.

“This is one of the most expensive forms of credit and consumers are shunning taking cash out with their credit cards.”

The number of purchases using credit cards, meanwhile, increased by 11.6 per cent to $132.831 million in December from $119.064 million in November. By value, credit card purchases increased by 5.6 per cent to $18.216 billion in December from $17.255 billion in November. “Certainly people are still using their cards, there are plenty of signs that people are using their cards quite actively … but while people are still making a lot of purchases, they’re also actively repaying the debt.” Mr James said.

Credit card repayments rose by 5.5 per cent to $18.807 billion in December from $17.822 billion in November. The number of credit and charge accounts increased by 0.4 per cent to $13.915 million in December from $13.858 million in November.

AAP