Australians applied for a record 3.75 million credit cards last financial year, an increase of more than 500,000 on the previous year, according to the Baycorp Advantage Quarterly Credit Demand Index.
However, Baycorp Advantage Managing Director Andrew Want said the rush to apply for new low-interest credit cards looked to be slowing, with card applications flat on last quarter. The Credit Demand Index indicates some consumers may be consolidating their debt into personal loans.
“Consumers have enjoyed an unprecedented amount of choice from credit card providers in the past year, with demand driven by competitive products from card issuers such as zero interest on balance transfers and products offering lower interest and fewer frills,” Mr Want said.
“Recent Reserve Bank data shows Australians are spending more on their credit cards, but the Baycorp Advantage Credit Demand Index shows that actual new card applications are no longer increasing at the same rate.
“At the same time we’ve also seen a very high increase in the number of personal loan applications, up 24 per cent on the same quarter last year, and 17 per cent up on the March quarter.
“Baycorp Advantage has made the observation for some time that as consumers become more defensive in how they manage household debt, there is likely to be activity in product types that help consumers consolidate household debts.
“The first wave of this was the move to low-cost credit cards, and now this quarter’s Credit Demand Index seems to indicate that there is a second wave underway, to products offering fixed interest and scheduled repayment periods.
“It indicates that consumers are becoming much more informed about how to best manage their personal credit portfolio, and are using their power of choice to find the products that suit individual consumers best.
“So far we only have one quarter which shows this sort of shift in credit applications – next quarter’s Credit Demand Index should confirm if it is a new trend.”