$13bn Debt In Reward Points Scramble
Sydney Morning Herald
Wednesday September 17, 1997
Australians owe $13 billion on their credit cards and personal overdrafts, an increase of 25 per cent in a year, as the chase for loyalty "reward points" encourages consumers to take on more debt.
Figures in the Reserve Bank's September bulletin show that consumers are using credit cards more frequently and borrowing more along the way. Credit card debt cracked $8 billion for the first time in July, up from $7.1 billion in the previous year.
The amount individuals, rather than business, owed on overdrafts was $5.1 billion, up more than 25 per cent. All up, personal debt on overdrafts and credit cards was up 25 per cent at more than $13 billion.
The number of credit card accounts rose 7 per cent to 7.7 million over the year to July, but transaction volumes surged by 20 per cent to 26.5 million per month.
The discrepancy indicates that cards are being used more frequently as consumers flock to "loyalty programs" which offer reward points for every transaction. As the points accrue, consumers become eligible for free travel, discounted items and other prizes.
"It's definitely the reward points," said the co-ordinator of Ryde-Eastwood Financial Counselling Service, Ms Narelle Brown. "People are making many more transactions on their credit cards. We have seen people with up to eight different credit cards. With $5,000 owed on each card, we are talking about a lot of money."
The general manager of Westpac's card products group, Mr Rob Bishop, agreed that loyalty programs offered by banks in conjunction with companies such as Telstra, General Motors-Holden's, Qantas and Ansett boosted credit card usage.
But he denied banks were enticing customers into a debt trap. "This is absolutely not to encourage debt," Mr Bishop said. "We want to consolidate our customers away from other competitors and we are quite happy to do that."
But the managing director of Marketfaxts, Mr Chris Gosselin, said the card-issuing banks would be rubbing their hands with glee. "They get a commission on every transaction and, if people can't make the payments, they are getting between 14 and 18 per cent interest on the cards, which is pretty nice," he said.
© 1997 Sydney Morning Herald
Share This