Over the past five years there have been significant growth in the Australian credit card market. As well as the big four Australian banks heavily marketing to attract new card users there has been a huge rise of entrants from other players outside of the major banks and from overseas players. The result now is a very competitive market with excellent interest rates on low rate cards and an array of reward offerings at the premium end of the market.



Growth in the market

Nowhere is the phenomenal growth more apparent than in the number of Australian cards.

Official statistics from the Reserve Bank of Australia (RBA) reveal how at the end of 2005, there were 12.47 million card accounts were held in Australia, however, by the end of October 2008 (the latest month for which figures available at the time of writing), this number had grown to 14.27 million. This is an increase of 14.4% in nearly three years.

The growth in total debt incurred through aussie cards is even more striking. In December 2005, total card debt stood at $34.23 billion (or an average of $2,744 debt per card). By October 2008, total debt had ballooned to a staggering $44.73 billion — an average of $3,135 debt per card. Total debt grew by nearly 31%, whilst the average debt per card increased by 14.2% during the three-year period.

Credit issuers have also made more credit available. December 2005 to October 2008 saw a seventeen percent rise in the average credit card limit which moved from $7,361 up to $8,588. In the first ten months of 2008 the average credit limit for an Australian card holder has risen 4.5%.

Major market players

There has also been a sea change in the popularity of certain types of cards. Australia's first major credit card brand, Bankcard, was launched in 1974 but it never recovered from the onslaught of Visa and MasterCard and folded up in 2006.

Visa has been the dominant credit card brand in Australia. But market trends in the last two years have shifted and many Australians now believe the best credit cards are those with low-interest rate features and/or offer rewards programs, and the market leader is facing stiff competition.

The grwoth of the low interest rate card market has also benefitied rival Mastercard. In addition, consumer sentiment appears to favour American Express as having the best credit card rewards program. To counter the competition, Visa has aggressively promoted prepaid credit cards and schemed debit cards.

Lingering concerns

In a recent interview, the Prime Minister expressed astonishment at the diversity of products — around five to six hundred different cards are on offer. The more important thing is the variation on interest rates from as low as 8 per cent to as high as 28 per cent.

The spread of rates are, in the Prime Minister's words, "extraordinary" and should be examined. While home loans have seen rates slashed as a result of the recent wave of RBA rate cuts, interest rates for purchases or cash advances on credit cards have failed to keep up with the cuts as banks seek to keep profits high. Retail associations have called on the banks to pass on more of the rate cuts to cardholders to help stimulate the economy and retail sector.

As an Australian consumer then it's important to know that there is a huge range of chouce available. The key point to remember is the importance of doing your research and comparing products to find the best credit card deals.