Credit card debt slows as consumers tighten finances

The growth of credit card debt racked up by Australian consumers has slowed to its lowest rate in over 13 years, new data has suggested.

According to research by the Reserve Bank of Australia, the average credit card balance rose by 1.8 per cent during the month of February to $3,085.

Over the past year, the average balance outstanding on credit cards has grown by 4.2 per cent - the slowest since records began in 1995 - despite rapidly rising interest rates and the uncertain global financial climate.

During February, the Reserve Bank increased interest rates by 0.25 per cent and followed it up with a similar rise in March, leaving rates at 7.25 per cent during April.

Total credit card repayments fell by 7.9 per cent to $16.77 billion during the month, down from $18.21 billion in January.

Cash advances, which usually carry a higher interest rate than other credit transactions, declined in February, both in number and value.

CommSec equities economist Savanth Sebastian told the Australian: "Consumers are clearly responding to higher interest rates and keeping their debt levels in order.

"It's likely that cash advances will continue to lose favour in coming months, as the impact of the March rate hike and the possibility of further rate hikes increase consumer awareness," Mr Sebastian said.

He added: "The number of credit card cash advances in February was 1.2 per cent lower than a year ago and has consistently fallen in annual terms for ten months."

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