Australian Credit Card Customers

Australian credit card customers 2008 is an invaluable insight into the behaviour and preferences of Australian credit card holders. The report focuses on key issues including card spending, reasons for card choice and preferred providers and sales channels. Each chapter concludes with a section that draws together the key findings and explains the relevance for providers.
Scope of this report

Based on It’s Australian Financial Services Survey of 2,000 adult consumers
Survey conducted in December 2007
Analysis broken down by parameters including gender, age, state and income
Survey findings related to specific providers

Research and analysis highlights

There is a high level of satisfaction towards credit card providers, although it is highest towards smaller players and credit unions in particular. 50% of consumers who have their main credit card with a credit union are very satisfied with their provider.

It’s research asked consumers for their views on the following statement ‘I feel that the rewards that I get from my card make up for the annual fee that I pay’. Consumers’ responses underlined both scepticism towards the value of reward schemes and annoyance at the level of annual fees.

More consumers would like to arrange their credit card online than are currently doing so. While only 26% of consumers aged 35-44 arranged their main credit card online, 41% would like to do so. Similarly, while only 20% of consumers aged 45-54 arranged their credit card online, 32% would like to do so.
Key reasons to read this report

Confirm what consumers look for when choosing a credit card
Quantify the benefit of card features such as reward schemes and balance transfer offers
Better understand consumers’ channel preferences when arranging a credit card

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Market overview

Credit card ownership and usage

Influences on credit card choice

Attitudes towards credit card providers

Effectiveness of credit card sales channels

Table of Contents

Table of figures

Table of tables

Market overview

The Australian credit card market has powered to new heights

Credit card balances now surpass $40 billion

The number of cards on issue doubled in the ten years to 2007

The credit card market cooled in 2007

The total number of credit card purchases is still increasing but is doing so more slowly

New credit card applications have slowed

Westpac remains the largest credit card issuer

Visa and MasterCard remain the dominant card schemes

Ascendant players have driven credit card market competition

Virgin has challenged the credit card status quo

The ending of the Virgin/Westpac relationship was inevitable given the success of the Virgin Credit Card

BankWest and Citigroup have grown their market share

There is increasing competition in the low rate space

0% balance transfer offers now litter the market

The Australian market is following the UK’s lead on balance transfer offers

Conclusion

Credit card ownership and usage

Many consumers hold multiple cards and maintain long relationships with their card issuer

Almost one-third of consumers hold more than one credit card

Men are more likely to hold two or more cards than women

A consumer’s relationship with a card issuer usually lasts more than five years

Growth in the credit card market over the next 12 months will come from existing cardholders

Wide credit card acceptance and frequency of usage drive spending

Overseas transactions and clothing and footwear drive credit card usage

Overseas card usage is driven by convenience and wide acceptance

Men are more likely to use a credit/charge card than women for many types of purchases

Young adults are least likely to identify their credit card as a common payment method

Consumers generally seem to be keeping their card spending in check

Men spend more on their main credit card than women

Consumers aged 45-54 are the biggest spenders on their main credit card

Victorians spend more than Queenslanders on their main credit card

High earners spend heavily on their credit cards

Many consumers do revolve a card balance from month-to-month

More than half of cardholders fail to pay off their credit card balance in full every month

Women are less likely than men to pay off their balance in full each month

Older consumers are most likely to repay their card balance in full each month

Lower earners are less likely to clear their card balance each month

One- in-four cardholders admits to using their card to make purchases they could not afford

Consumers do not see revolving a balance as ‘borrowing’

Consumers are comfortable with their credit limits

More than 40% of consumers have a credit limit of less than $5,000

Almost 80% of consumers believe that their credit limit is at the right level

Younger cardholders are more likely to believe that their credit limit is too low

Few consumers have consolidated debts onto their main credit card

Conclusion

Influences on credit card choice

Fees and rates are big factors influencing card choice

More than 80% of consumers believe that low rates are an appealing feature when choosing a new card

Low fees are important to all age groups while the importance of other features decreases with age

Balance transfer offers appeal to 45% of consumers

There is consumer indifference towards reward schemes

More than one third of cardholders do not see the value in rewards schemes

Almost half of cardholders say that the opportunity to earn points does not increase their card spending

Only around one-quarter of cardholders say that they try to redeem points at least once per year

Many cardholders feel that the benefits of their reward scheme are outweighed by the annual fee they pay

Reward schemes are failing to engage consumers

The different attributes of banks and non-banks influence choice of card provider

Existing relationships give banks the advantage

Rewards schemes do win some customers

Rewards drive acquisition for Amex

The non-banks are winning business based on a low rate, low fees proposition

Younger consumers are most likely to choose a provider based on a low cost proposition

Many consumers choose to bundle their financial products

Gifts, endorsements, affinity partnerships and telephone sales do not win business

Competition and aversion to high fees and rates drive card cancellation

Consumers will cancel a credit card if they receive a better offer

High interest rates drive card cancellation

The annoyance of annual fees also drives card cancellation

Poor service is more likely to drive a man to cancel a credit card than a woman

High interest rates are most likely to cause consumers in their 30s and 40s to cancel their credit card

Conclusion

Attitudes towards credit card providers

Consumers display high levels of satisfaction towards credit card providers

Almost two-thirds of cardholders are satisfied with their credit card provider

Women are more satisfied with their main credit card provider than men

Uncompetitive pricing and high fees are again key sources of dissatisfaction

Credit unions win the customer satisfaction stakes

More than 50% of consumers holding credit union credit cards are very satisfied

The big four achieve similar levels of customer satisfaction

Consumer inertia makes market entry by non-traditional providers difficult

Consumers strongly favour traditional providers

73% of consumers would take out a credit card issued by a bank, but only 4% would do so from a utility company

Consumers are also unwilling to purchase other financial products from non-traditional providers

Conclusion

Effectiveness of credit card sales channels

The internet is an effective secondary credit card sales channel behind the branch

Face-to-face remains the preferred sales channel

The internet is proving an effective credit card sales channel

Younger consumers are more inclined to arrange their credit card over the internet

Men are more likely to use the internet to arrange a credit card than women

BankWest and Citigroup are among those players benefiting most from the online channel

More consumers would like to arrange their credit card online

41% of consumers aged 35-44 would like to arrange their credit card online

Only 32% of consumers say they would never arrange a credit card online

Conclusion

APPENDIX

Data tables

Market Overview

Credit card ownership and usage

Influences on credit card choice

Attitudes towards credit card providers

Effectiveness of credit card sales channels

Further reading

Ask the analyst

It consulting

Disclaimer

List of Tables

Table 1: Credit card balances outstanding, 2002-2007

Table 2: Number of credit/charge and multi-function cards on issue, 1994-2007

Table 3: Number of credit card purchases, 2002-2007

Table 4: Credit card balances outstanding by card issuer, December 2007

Table 5: Card scheme shares of total number and value of purchases, December 2007

Table 6: BankWest credit card balances outstanding, 2002-2007

Table 7: Number of credit cards held by consumers

Table 8: Number of credit cards held by consumers, by gender

Table 9: Number of credit cards held by consumers, by state

Table 10: Number of credit cards held by consumers, by age

Table 11: Number of credit cards held by consumers, by personal income before tax

Table 12: Length of time cardholders have held their main credit card

Table 13: Consumers planning to take out new financial products in the next 12 months

Table 14: Payment method used most commonly when abroad

Table 15: Percentage of consumers indicating that their credit card is their preferred payment method for different purchase types, by gender

Table 16: Percentage of consumers indicating that their credit card is their preferred payment method for different purchase types, by age

Table 17: Credit card spending per month

Table 18: Credit card spending per month, by gender

Table 19: Credit card spending per month, by age

Table 20: Credit card spending per month, by state

Table 21: Credit card spending per month, by personal income before tax

Table 22: Proportion of balance of main credit card paid off each month

Table 23: How often cardholders pay interest on their main credit card, by gender

Table 24: Proportion of balance of main credit card paid off each month, by age

Table 25: How often cardholders pay interest on their main credit card, by age

Table 26: Proportion of balance of main credit card paid off each month, by personal income before tax

Table 27: How often cardholders pay interest on their main credit card, by personal income before tax

Table 28: Consumers’ views on the following statement - “I sometimes buy things I cannot really afford on my credit card”

Table 29: Consumers’ views on the following statement - “I only use my credit card for making purchases, and never to borrow money”

Table 30: Credit limits held by cardholders with personal income before tax of less than $20,000

Table 31: Views on credit limit on main credit card

Table 32: Views on credit limit on main credit card among cardholders aged 18-24 years

Table 33: Consumers who have consolidated debts on their main credit card

Table 34: Consumers who have consolidated debts on their main credit card, by personal income before tax

Table 35: Consumers who have consolidated debts on their main credit card, by age

Table 36: Features consumers regard as appealing when choosing a new credit card

Table 37: Features consumers regard as appealing when choosing a new credit card, by gender

Table 38: Features consumers regard as appealing when choosing a new credit card, by age

Table 39: Consumers’ views on the following statement - “I don’t see the value in reward schemes because I do not spend enough to get any good rewards”

Table 40: Percentage of cardholders who chose their credit card provider due a low interest rate on purchases or no fees, by provider

Table 41: Percentage of cardholders who chose their credit card provider because they wanted to bundle their financial products

Table 42: Reasons why consumers cancelled their last credit card

Table 43: Reasons why consumers cancelled their last credit card, by gender

Table 44: Reasons why consumers cancelled their last credit card, by age

Table 45: Consumer satisfaction levels towards main credit card

Table 46: Consumer satisfaction towards providers of financial products

Table 47: Consumer satisfaction towards main credit card provider, by gender

Table 48: Consumer satisfaction towards main credit card provider, by age

Table 49: Reasons why consumers are dissatisfied with their main credit card provider

Table 50: Consumer satisfaction towards main credit card provider, credit unions

Table 51: Consumer satisfaction towards main credit card provider, ‘big four’ banks

Table 52: Willingness of consumers to consider credit cards offered by different types of provider

Table 53: How consumers arranged their financial products

Table 54: Consumers who arranged their credit card in the branch or online, by age

Table 55: How consumers arranged their credit card, by gender

Table 56: Percentage of consumers whose main credit card is provided by the highlighted issuers that arranged their credit card online

Table 57: Percentage of consumers that would like to arrange their financial products online

Table 58: How consumers arranged their credit card compared to how they would like to do so, by age

Table 59: Make up of consumers who would never consider arranging a credit card online, by age

List of Figures

Figure 1: More than 30% of cardholders only manage to repay less than half of the balance of their main credit card each month

Figure 2: Credit unions have the highest levels of satisfaction among their credit card customers - more than half of credit union cardholders are very satisfied

Figure 3: While younger consumers have embraced the internet, older consumers are not moving away from the branch so readily

Figure 4: Credit card balances outstanding now surpass $40 billion, with more than 70% of balances incurring interest

Figure 5: There were almost 23 million credit cards on issue in Australia in 2007, more than double the number on issue ten years ago

Figure 6: 1.35 billion credit card purchases were made on Australian credit cards in 2007, up by 6.2% in 2007

Figure 7: Westpac is Australia’s largest credit card issuer based on outstandings, with 23% of the market

Figure 8: The positioning of American Express and Diner’s Club cards to the mass affluent gives these card schemes a larger share of the total value of purchases than of the total number of purchases

Figure 9: BankWest has enjoyed double digit growth in its credit card balances outstanding during each of the last five years

Figure 10: Almost one-third of consumers have two or more credit cards

Figure 11: 39% of cardholders aged 65 and over own more than one credit card, compared with only 13% of cardholders aged 18-24

Figure 12: Multiple cardholding is more common among higher income consumers, with more than half of cardholders earning above $80,000 owning two or more cards

Figure 13: The relationship between a customer and credit card issuer usually lasts at least five years, and in many cases ten years or more

Figure 14: Only 5% of consumers plan on taking out a new credit card in the next 12 months

Figure 15: 40% of consumers prefer to use their credit or charge when purchasing clothing and footwear or when overseas

Figure 16: In general men are more likely than women to have their credit card as a preferred payment method, with 36% of men commonly using a credit/charge card when eating out, compared to 26% of women

Figure 17: Only 13% of cardholders spend more than $2,000 per month on average on their main credit card

Figure 18: The biggest credit card spenders are aged 45-54 - 17% of 45-54 year olds spend more than $2,000 per month, compared with 9% of 18-24 year olds

Figure 19: There is a clear correlation between income and card spending with 52% of cardholders earning $100,000 or more spending upwards of $2,000 per month on their credit card, compared to only 7% of cardholders earning $20,000 - $40,000

Figure 20: More than 30% of cardholders only manage to repay less than half of the balance of their main credit card each month

Figure 21: 47% of women say that they pay interest on their main credit card at least every other month, compared with only 40% of males

Figure 22: Almost half of cardholders in the lowest income groups pay interest on their main credit card at least every other month, compared with less than a quarter of cardholders in the highest income group

Figure 23: One-in-four cardholders admits to using their credit card to buy things they cannot afford

Figure 24: Cardholders do not see revolving a credit card balance as borrowing - only 13% of cardholders admits to borrowing on their card

Figure 25: More than one-in-four of cardholders with an income of less than $20,000 have a credit limit greater than $5,000

Figure 26: Four out of five cardholders are happy with their current credit limit

Figure 27: Cardholders aged 18-24 are most likely to believe their credit limit is too low - 18% of 18-24 year olds would like a higher limit

Figure 28: Only 11% of cardholders have consolidated credit card and/or personal loan debt onto their main credit card

Figure 29: More than 85% of consumers believe that lower fees are an appealing feature when choosing a new credit card

Figure 30: Younger consumers are more likely to regard a lower rate on purchases as an appealing feature when choosing a new card - 64% of 18-24 year olds say that lower rates are an attractive card feature

Figure 31: 57% of consumers aged 18-24 believe that an interest free balance transfer offer is appealing when choosing a new card, compared to 40% of consumers aged 55-64

Figure 32: Consumers are fairly indifferent to the value of reward schemes with 36% of cardholders believing they can earn good rewards, but 32% believing they are unable to do so

Figure 33: Reward points do not encourage card spending - 49% of cardholders do not spend extra just to earn points

Figure 34: Less than 20% of cardholders aged 18-24 agree or strongly agree with the statement ‘I enjoy the benefits of the reward scheme and try to redeem points at least once a year’, compared with at least 27% of cardholders in all other age groups

Figure 35: 43% consumers feel that the annual fee on their card outweighs any benefit they receive from the card’s reward scheme

Figure 36: Collectively the big four banks win more than 30% of their credit card business based, at least in part, on an existing relationship with the customer

Figure 37: More than half of American Express cardholders chose the card because of its rewards scheme

Figure 38: Low rates and fees are winning business for Virgin, Aussie and Wizard over the ‘big four’

Figure 39: 25% of Westpac cardholders chose the bank because they could bundle their financial products

Figure 40: Cardholders will cancel a card if they believe the interest rate is too high or if they are concerned about getting into too much debt

Figure 41: Consumers aged 35-44 are the most likely to have cancelled their last credit card because of high interest rates or because they felt they no longer needed the card

Figure 42: Consumer satisfaction towards credit card providers is high but is lower than towards the providers of other financial products

Figure 43: Credit unions have the highest levels of satisfaction among their credit card customers - more than half of credit union cardholders are very satisfied

Figure 44: The ‘big four’ have comparable credit card customer satisfaction indicators, although with 68% of its credit card customers very or quite satisfied ANZ is doing best

Figure 45: Consumers are generally unwilling to consider a credit card from non-traditional providers including utilities and supermarkets

Figure 46: 53% of consumers arranged their credit card in a branch, more than did so for their investments or life insurance but less than for their mortgage and personal loan

Figure 47: While younger consumers have embraced the internet, older consumers are not moving away from the branch so readily

Figure 48: Men are more inclined to arrange a credit card online - 27% of men arranged their credit card online, compared to 21% of women

Figure 49: The likes of BankWest, Citigroup, Virgin and HSBC are outdoing the big four based on the percentage of their customers who use the internet to arrange their credit cards

Figure 50: More consumers would like to arrange their credit card online than any other financial product

Figure 51: More consumers would like to arrange their credit card online than are currently doing so, particularly among older consumers

Figure 52: Consumers who are unwilling to use the internet to arrange a credit card are most likely to be aged 65 and over

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