Card spending hits new record high in November

Card spending hit a record high in November, with the latest RBA data showing the total value of transactions on both debit and credit cards reached $76.38 billion.

This record-breaking spending spree is no surprise. The latest ABS retail trade figures also recorded a significant rise as Australians took to the shops both online and in-store during the Black Friday and Click Frenzy sale periods.

Total value of transactions: personal credit and debit cards in November 2023

Source: RBA, released 12 January 2024, seasonally adjusted data, excludes commercial cards. Monthly change is October 2023 to November 2023, year-on-year change is November 2022 to November 2023.

Credit card debt drops in November but a rise likely to come

Credit card debt attracting interest charges dropped in the month of November by $115 million, according to today’s RBA data.

The drop follows a similar pattern from previous months. The RBA data shows debt accruing interest has dropped every month since May, with the exception of October.

The problem is, November’s record-breaking spending levels could prove to be a ticking time bomb for some families if they don’t clear their credit cards within their interest free period. Over the last three summers, credit card debt has risen in both December and January.

RateCity.com.au data shows the most popular interest free period on credit cards is up to 55 days – which means Black Friday shoppers who put purchases on their credit card will need to have cleared this debt between 19 December and 18 January, depending on their billing cycle, to avoid incurring interest charges, provided they started with a clean slate before the sales.

Credit card debt accruing interest: November 2023 (Note: commercial cards are excluded)

Source: RBA, released 12 January 2024, original data. Monthly change is October 2023 to November 2023, year-on-year change is November 2022 to November 2023.

Why are there so many credit card accounts?

The number of credit card accounts continued to increase in November, rising by more than 9,000 accounts in just one month, and just over 180,000 accounts since the same time last year, according to the RBA data.

Number of credit card accounts: November 2023 (Note: commercial cards are excluded)

Source: RBA, released 12 January 2024, original data. Monthly change is October 2023 to November 2023, year-on-year change is November 2022 to November 2023.

There are a number of factors contributing to the rise in credit card accounts. A RateCity.com.au survey of almost 2,000 credit card users (1,911) found almost 1 in 4 (23%) people had opened up a new credit card account in the last 12 months. Of these:

• 59% said they opened the account to get rewards points;
• 22% said it was to transfer an existing debt to a 0% balance transfer deal; and -
• 29% needed a card to plug a hole in their current budget.

Note: respondents could tick more than one option.

RateCity.com.au research director, Sally Tindall, said: “Australians love a bargain but this year’s Black Friday sales took things to the next level.

“The RBA data shows we spent more on credit and debit cards combined in November than any other month on record,” said.

“The rising cost of living is putting a major dent on our debit and credit cards but this is also driving many Australians to seek out decent discounts where they can.

“The big question is whether this spending spree will turn into a ticking time bomb for households. Anything that went on credit will need to be paid back in full by the end of the interest-free period, otherwise it’s going to get hit with charges, if it hasn’t already.

“Credit card debt dropped in the month of November which is fantastic to see, particularly given the economic climate, but if history is anything to go by, it’s highly likely to tick up over the next couple of months.

“If you’ve got debt hanging over from the November sales, do whatever it takes to clear it as soon as humanely possible, because the last thing you want to be doing on a tight budget is paying interest on your credit card.

“The number of credit card accounts has grown yet again, as Australians chase frequent flyer points and other rewards. However, our research shows almost one in three people who recently got a credit card were planning to use it to plug holes in their budget – a quick solve that can get out of hand very quickly.

“Whatever the reason you’re getting a credit card, make sure to read the fine print and know exactly what you’re getting in to, because a seemingly good deal on the surface can go rotten very quickly,” she said.

How to pay off a credit card debt before you get hit with interest

• Remove the temptation: Take the card out of your wallet and off your phone. It’s time to go cold turkey, at least until you clear your current debt.

• Turn your spending spree into a selling spree: Toys the kids no longer use, like golf clubs or bikes gathering dust in the corner of the garage, even Christmas presents you know you won’t use. Sell the lot second-hand.

• Take back what you can: is there anything you’ve bought that’s still yet to be used? Some stores will refund Christmas shopping up until the end of January so it might not be too late to undo your mistake.

• Cash in some of your rewards points: if you are up to your eyeballs in Christmas debt but flush with rewards points, consider cashing some of them in for essentials such as supermarket vouchers so you can use that money to knock off your debts.

• Beware of the balance transfer deal: Balance transfer deals, where you transfer an existing debt on to a new credit card with a zero per cent interest-free period can seem like a clever hack but these cards are ladened with traps that could trip you up – don’t let that be you.

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