photo credit: Andres RuedaMarketing of credit cards by banks has intensified as more consumers try to avoid the risk of incurring greater personal debt and opt for the greater sense of financial control offered by debit card schemes.

Consumers are being bombarded with advertisement and brochures for credit cards offering everything from no annual fees, to reduced interest rates, increased credit limits and more rewards points.

At the same the use of debit cards, which work like an EFTPOS card but can also be used to purchase goods online, and make payments over the phone, has soared.

Credit card expert and director of MWE Consulting Mike Ebstein said overall credit card usage had fallen back during the global financial crisis, leading to a dramatic shift towards debit cards in past 12 months.

“Debit cards have been positively affected by the recession because in times of uncertainty, people want control, they want to get rid of doubt,” Mr Ebstein said in an interview.

“To some extent there is uncertainty associated with credit cards because you’re only limited by the size of your credit limit.”

But Mr Ebstein said the shift had also occurred because banks together with card providers Visa and Mastercard had over last two years aggressively marketed debit cards as a better alternative to EFTPOS payments.

“As far as the major banks were concerned it was a new product development,” he said.

“But you would say that some of the spend that’s going into scheme debit almost certainly would have otherwise gone to scheme credit.”

The latest Reserve Bank of Australia (RBA) data show that over year ended July, the number credit card purchases rose by just three per cent.

However, consumer use of scheme debit cards for purchases soared by 30.81 per cent.

Commonwealth Bank of Australia (CBA) is among the many financial institutions trying to entice more credit card customers and encourage existing customers to increase usage.

The bank will next month lauch several new card products as its transforms its credit cards suite by offering Low Fee and Low Fee Gold cards.

CBA will waiver the usual annual fee on the two card products if existing customers spend annual amounts of $1,000 and $10,000, respectively.

The interest rate charged will be 18.49 per cent.

The new Low Rate Gold card will have a rate of 11.74 per cent alongside a $90 annual fee for existing customers and a $120 annual charge for new customers.

Its rewards card scheme customers will also be able to ask for an American Express card on the same account, to maximise the number of rewards points earned.

CBA general manager credit cards Stephen Karpin said the bank’s research had found consumers were happy to trade off one feature of a credit card for another to best accommodate their card usage.

Choice spokesman Christopher Zinn said there had been a bit of a “free-for-all” in the credit card market recently.

“It’s one of the more expensive ways to actually borrow money and one of the more profitable area of the bank’s operations,” he said.

“That’s why there’s a lot of banks seeking to get people to change cards, to move to new cards, sending two cards instead of one, sending out inducements to increase your credit card limit.”

At a time when debt has a bad name and was one of main problems behind the global financial crisis the increased marketing activity and launches of new credit cards might seem aggressive and unnecessary.

But the Australian credit card market is one of the few in the world that is still growing.

A report by MWE Consulting found that compared to the United Kingdom, Ireland and New Zealand, Australia was the only country where credit card spending is still growing, albeit at a much slower rate than before.

Mr Ebstein said increased marketing and introduction of new products in the industry was a typical reaction to tough economic conditions.

“Instead of growing at 20 per cent as it was five years ago, today [credit card spending is] growing at one to two per cent, so the dynamics of the market are giving very little scope for growth to the issuers,” he said.

“They have to be innovative, they have to be active marketers to try and generate new business and I think that’s why we’re seeing activity in the credit card market because issuers can’t rely on the market to deliver growth - the market itself is stagnant.”

AAP