Are credit cards retiring?

Credit cards were first introduced in Australia in 1974 and were met with great enthusiasm. People quickly embraced these convenient cards, which allowed them to pay for purchases with a simple swipe. Credit cards have come to be seen as reliable, convenient, and trustworthy in times of need.

Credit cards provide convenience and allow for immediate payment without the need to wait. They can be used for a wide range of transactions, and the bills are mailed to the cardholder’s home. To maintain their credit card usage, holders must pay their bills each month.

Credit cards have been the dominant form of financial payment for the last 40 years, but recently, there has been a shift towards other financial media to reduce charges and costs. Studies have shown that this trend started in 2015.

For example, in 2015 and after 2015, financial media such as “Buy Now and Pay Later (BNPL)” helped people buy things now rather than later. This provided financial relief and acted as a facilitator for financial transactions, although it is not a credit facility itself.

Observations have shown that “Buy Now and Pay Later” media have decreased the use of credit cards. Similarly, platforms like Afterpay and ZipPay emerged online after 2015. These platforms allow investors to pay off purchases in instalments. Due to the convenience they provide, these media have helped reduce credit card usage and improve the economy.

Credit cards and financial instruments such as “Buy Now and Pay Later” have both gained popularity. However, one key difference is that credit card purchases come with interest charges, whereas BNPL purchases do not. However, BNPL does have fees for maintaining the account, interest on missed payments, and late fees for unpaid fees.

BNPL platforms like Afterpay have gained significant popularity in Australia, with BNPL transactions seeing a 55% increase between 2019 and 2020 and a 3-fold increase in the last 2 financial years. However, data shows that 21% of Afterpay users incurred late payment fees in 2020, indicating a need for better financial management and possibly seeking financial assistance to avoid such fees.

In contrast, younger people tend to use credit facilities such as “Buy Now and Pay Later” more often. These individuals are often not financially stable and many are students who work part-time. Despite this, reports have shown that those who use BNPL are able to better manage their finances. However, those who do not use these services may end up in a downward financial spiral.

However, according to Choice.com, BNPL arrangements are often utilized by individuals facing financial difficulties due to their less stringent requirements compared to other payment options. Similarly, credit cards are often used by the general population for both short and long-term payments, regardless of their financial situation.

Despite the rise of new financial media in Australia, the use of credit cards decreased. In 2019, when BNPL usage increased, the Reserve Bank of Australia reported that the number of Australian credit card accounts dropped from 14.6% in March 2019 to 13.6 million in March 2020.

In order to obtain a credit card, an individual must go through a financial process. However, individuals who have existing debt are not eligible to receive credit cards. As a result, the usage of credit cards is low among the 22% of applicants who already have debt.

In conclusion, poor management of credit cards and financial instruments can result in financial distress. To avoid this, it is important to make regular payments and adhere to credit rules to prevent default.

Despite this, it is still true that the use of credit cards has decreased over time in Australia due to the rise of alternative payment methods.

The Australian government’s helpline offers assistance, advice, and relief for those in financial difficulty within Australia.

Alternatively, if you require assistance with managing your credit cards, you can consult with a financial planner to devise the most suitable financial strategies for you. It is also believed that the use of credit cards will decrease even further if financial payment methods and platforms such as BNPL offer enhanced security, stability, and financial relief.