Aussies Prefers Cash Instead of Credit Cards

The Reserve Bank of Australia said the national credit debt dropped by a percent last August, reaching its lowest level since January 2012. The total national credit debt is at $49.2 billion.

The Reserve Bank added that credit card debt of Aussies has been on the decline since June 2012. This is also the first time since February that the national credit card debt fell below $50 billion.

The latest data from the Reserve Bank is another proof that Aussies prefer to pay for items in cash rather than use credit card. Aussies are also more inclined to defer shopping to ensure that their cash remains with them.

This is also the first time in many years that Aussies avoid spending through credit cards. For years, credit cards have been the preferred medium to purchase items even during times of financial crisis.

In the past five years alone, credit card increased by close to 20 percent. During the global financial crisis of 2008 and 2009, Aussies continued to charge their purchases. Credit card spending even increased by about five percent in 2008 and six percent in 2009.

Craig James said the statistics pose another challenge for the Reserve Bank. RBA has been seeking to stimulate public spending to further boost the economy. He said despite rate cuts, people are not spending or using it to lift borrowings. Rates cuts instead are used to repay debt or increase savings.

James is CommSec chief economist.