Younger Generations Relying More on Credit Cards

Oct 28

Younger Generations Relying More on Credit Cards

According to new data, younger generations are finding themselves under increasing financial pressure and are relying more heavily on their credit cards than their debit cards. Perhaps it is for this reason that a new study released by Quantium, a data analytics company that surveyed more than 300-million card transactions over a 12-month period, found that purchasing and buying behaviour and trends are markedly different over different states, categories and generations. The survey found that generation z and y were using their debit cards more often than putting their daily expenses onto a credit card.

Younger generations are showing strong signs of growth as they look to open transaction and savings accounts while older citizens are turning their attention to rewards cards, according to NAB.

In the z and y generations, more purchases are being transacted on debit cards rather than credit cards in grocery stores and supermarkets. Baby Boomers and generation x however are spending more on credit transactions. Generation x are the big spenders according to the data, spending much more on credit and not using their debit cards as frequently. The average spend approximates to $54,943 per person over the course of a year. Baby Boomers are close behind with $54,499 during 2011 on both card types while generation y is only spending $30,976 on their cards every year.

Generation z, which is the largest market and incorporates people under the age of 22, only spent an average of $17,823.

In terms of regions and territories, Western Australia showed the biggest spend trends in electronic transactions (source: Bankwest), hitting an average of $51,804, while Tasmania was at the bottom of the group with $39,794.

The study revealed that 45% of Aussies preferred to use a credit card for their retail purchases, over and above their supermarket spend. Buying behaviour showed that consumers visit grocery stores more than once a week, and are spending in excess of $60 per visit. The survey showed consumers were topping up with fuel 32 times a year, and totalling $55 for each visit.

Generation X and Baby Boomers are spending 50% more on petrol on credit card purchases, while buying behaviour for Generations Z and Y shows that they are using their debit cards more often.

With credit being used so much for everyday expenses the national class action that has been filed against some of the country’s biggest lenders saw banking customers come out tops in their challenge against excessive card fees. And while people appear to be happy to use their cards they clearly are not happy with the charges that are being levied against them for misdemeanours like dishonoured payments, non-payments and late payments, overdrafts and overdrawn accounts.

38,000 customers are being represented by IMF Australia in what is considered to be the country’s biggest ever class action, which sees 170,000 people trying to recover $220-million in charges from the country’s eight biggest lenders. In December the Federal Court declared that four fee classes fell under the scope of ANZ’s late payment fee schedule, as penalties that could be challenged in a court of law.

The High Court has ruled that late payment fees can now be contested and the Federal Court will have the final say in whether the banks are charging acceptable fees for their administrative services. The class action however is of the opinion that the $30-$35 fees being charged are excessive and more than what it costs the banks to make the facilities available. The case is being paid for by IMF Australia while Australia’s third largest bank ANZ, has been singled out as the case’s main defendant, being forced to justify what is largely considered to be an exorbitant set of fees.