With the tightening of lending criteria plus new rules which came into force on 1 January, 2019 is expected to be “the year that finally bursts the plastic bubble”.
New figures out by the Reserve Bank of Australia (RBA) show the number of new credit card accounts dropped to 15.97 million in November 2018, making it the lowest level of active accounts since March 2015
Total credit limits also fell to $151.94 billion in November, down from $152.09 billion in October, despite it being a month out from the busy Christmas shopping period.
Both changes are in line with the new credit card rules which came into play at the start of this year, which make it harder for people to get access to credit. Borrowers will now only be given credit which can be paid off within three years.
With tightened lending many people are also deciding whether or not to get rid of their credit card in order to be approved for their mortgage.
Sally Tindall, research director at RateCity.com.au, said the figures were a sign Australian credit cards could be on the decline.
“The government’s new regulations will force new credit card applicants to accept a credit limit they can prove can be repaid within three years. It will also see people rethink the merits of having multiple cards,” Tindall said.
“Meanwhile, people applying for home loan in 2019 might choose to cancel their credit card or reduce their limit in order to get their home loan application over the line.”
The RBA data shows people are also taking their foot off the pedal when it comes to credit card , in particular putting fewer purchases on the cards and paying less interest.
Balances accruing interest fell to $31.52 billion in November, which was the lowest level since September 2017
Tindall said, “This trend is likely to continue as it gets harder to get approved for a credit card and people grow more fed up with the traditional ways to pay.
“Australians are looking for alternatives to the humble credit card as buy-now-pay-later options such as Afterpay and Zip Pay grow in popularity.”