Why we’re falling out of love with our credit cards

The number of cards on issue in 2018 fell year on year for the first time since 2000.

The number of cards on issue in 2018 fell year on year for the first time since 2000. Photo: Getty

Australians are falling out of love with credit cards, with the numbers of cards on issue dropping 14 per cent over the past 2½ years.

Reserve Bank data shows the number of credit cards in Australia has shrunk from 22,795,000 in September 2016, to 19,601,000 by February 2019.

Cards on issue have declined each month (bar two) since September 2016, mirrored by a similar fall in charge cards from 1,540,000 to 1,489,000 by February 2019.

The year to December 2018 represented the first year-on-year drop in credit card numbers since 2000.

But before you think that could be reason for a celebration of financial common sense, think again.

Graham Cooke, Insights manager with comparison site, said there were a couple of factors behind the credit card decline, but one of the biggest was the meteoric rise of buy-now-pay-later (BNPL) systems, such as Afterpay and Zip Pay.

Buy now, worry later

The rise of the BNPL industry over the past few years has been astonishing.

An ASIC report on the industry in late 2018 found that user numbers soared from 400,000 in the 2016 financial year, to two million by the 2018 financial year.

Transactions grew almost 24-fold from 80,000 in 2016 to 1.8 million in 2018, while revenue more than doubled from $32 million to $78 million.

Perhaps more worryingly, the report also highlighted the fact that 40 per cent of users earned less than $40,000, that outstanding balances rose to $1 billion in the 2018 year, and that almost 17 per cent of users had become overdrawn, delayed other bill payments or borrowed additional money.

Financial commentator and educator Scott Pape said ordinarily he would welcome a reduction in the number of cards operating in Australia. But not if they were being replaced by greater use of BNPL services.

“What we will see out of that [reduction] is that there’s been a rapid take up of the likes of things like Zip Pay and Afterpay,” Mr Pape said.

“Or as I call them, the ‘buy now and screw you later’ offers.”

Mr Pape said Australia clearly had a credit card problem, and he’d love to see parents across the country put their cards into a blender in front of their kids to show them, ‘We earn interest, we don’t pay interest’.

BNPL systems were the brainchild of “a bunch of multi-millionaires with yet another plan”, he said, and branded them the financial equivalent of marijuana.

“They’re a gateway drug, and BNPL services are another in a long line of corporations that get people to buy spend money on things they don’t need.

“If you talk to financial counsellors, they’ll tell you that young people are so addicted to BNPL, and that a lot of them don’t just have Afterpay or Zip, but also have personal loans too … and they’re skipping meals or missing rent payments.

“The average purchase on BNPL is about $180. Seriously, if you really have to split a $180 purchase into four payments, what the hell is wrong with you?”

The industry counters that their spending limits are far more modest than credit cards, with Afterpay, for example, limited to $2000.

How do they work?

Zip Pay

Once you purchase an item, you choose a weekly, fortnightly, or monthly repayment schedule. A minimum monthly payment of $40 is required.

If you fail to pay off the purchase by the end of the month in which you receive your statement, you incur a $6 monthly fee.


A fortnight after you purchase an item, you are required to repay the first quarter of the outstanding amount through an automatic debit. The remaining quarters are paid back every two weeks after that.

With purchases over $500, you must pay the first quarter at the time of purchase. Late fees start at $10 and are capped at 25 per cent of the purchase price, or $68, whichever is the lesser amount.

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