Will credit card debt arrest its steady fall in time for Christmas?

Will credit card debt arrest its steady fall in time for Christmas?

The Reserve Bank’s data for credit and charge cards in the September quarter found balances accruing interest fell a further 2.63% month-to-month to reach $21.2 billion – the lowest it has been since 2004.

Whether it’s contributed to the recent stimulus payments, a more frugal household budget during the pandemic, or a rise in the use of debit cards, the data is the latest in an enormous slide experienced since pre-COVID and, indeed, over the past 12 months.

In that period, interest on balances accruing has fallen by 28%, and 23.8% specifically since the COVID-19 breakout in March.

This has, in turn, had an impact on spending figures. The RBA’s data indicates that purchases on credit cards has fallen more than 6% year-on-year, while the value of those purchases fell by nearly 15%.

In the lead-up to Christmas, we traditionally see a spike in spending as consumers get organised for Christmas and the holidays. While there are no expectations for a miraculous recovery, that is expected to remain the case this year – certainly, if the data is to be believed.

According to the RBA, based on the month-to-month figures, credit card purchases, and their value rose by just under 1% each, indicating a pre-Christmas recovery could be on the cards.