In the Press
03 December 2011
Give them credit: Gen Y leads consumer charge of shunning the banks' money in card game
Alexandra Smith
Brisbane Times
BUDGET-conscious consumers and cash-strapped Generation Ys are increasingly shunning credit cards in favour of debit cards, particularly for online purchases and smaller items including groceries, petrol and travel tickets.
The latest data from the Reserve Bank reveals there has been a 17 per cent annual growth rate of debit cards compared with a 5 per cent growth of credit cards as people tighten their belts and reduce spending.
Alan Shields, the director of the financial services research firm RFi, said an analysis of the data showed the use of debit cards had been increasing since about 2006 while credit card use was shrinking.
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''The number of debit cards are growing at a faster rate than credit cards and the value of purchases on debit are growing at a faster rate than credit,'' he said. ''What you can expect in the future is that debit cards will make up a larger proportion of cards.''
Mr Shields said RFi research showed that only one-third of 18 to 24-year-olds had a credit card while 60 per cent who had a debit card. Two-thirds of older consumers had a credit card.
Andrew Cartwright, the country manager for MasterCard, said Generation Ys were increasingly embracing debit cards. ''We are seeing the increasing use of debit by all Australians because from an overall perspective, people continue to prefer electronic payments over cash and cheques,'' he said.
But Mr Cartwright said the growing popularity of debit cards was particularly evident in people aged 18 to 24.
''Many Gen Ys could be ineligible for a credit card because they have not been in a job for long enough or do not earn the required income but debit gives them all the benefits and functionality of a credit card,'' he said.
Mr Cartwright said younger consumers were particularly attracted to debit cards because they were ''online savvy'' and needed to pay for a range of internet purchases such as music from iTunes and concert and movie tickets.
''Debit cards tend to be used for everyday purchases such as in supermarkets or at the movies while credit cards are still used for bigger purchases,'' he said.
The latest statistics also show the average amount spent on a credit card was $130 compared with $62 on a debit card, with the most popular categories for debit cards including food, petrol and entertainment.
Ingrid Just, a spokeswoman for the consumer group Choice, said debit cards were becoming more popular as people tried to steer clear of worsening debt on their credit cards.
''Debit cards allow people to be spending their own money and gives them greater control over their finances, especially … paying for so many things online,'' she said. ''Parents are setting up debit cards for their kids rather than credit cards and people see the Visa or MasterCard functionality as attractive when you need to be able to make payments over the internet for things like flights.''