Overview 1
Catalyst 1
Summary 1
Executive Summary 3
Market overview 3
Credit card ownership and usage 3
Influences on credit card choice 4
Attitudes towards credit card providers 5
Effectiveness of credit card sales channels 6
Table of Contents 8
Table of figures 9
Table of tables 10
Market overview 11
The Australian credit card market has powered to new heights 11
Credit card balances now surpass $40 billion 11
The number of cards on issue doubled in the ten years to 2007 12
The credit card market cooled in 2007 13
The total number of credit card purchases is still increasing but is doing so more slowly 13
New credit card applications have slowed 14
Westpac remains the largest credit card issuer 14
Visa and MasterCard remain the dominant card schemes 15
Ascendant players have driven credit card market competition 16
Virgin has challenged the credit card status quo 16
The ending of the Virgin/Westpac relationship was inevitable given the success of the Virgin Credit Card 16
BankWest and Citigroup have grown their market share 17
There is increasing competition in the low rate space 18
0% balance transfer offers now litter the market 19
The Australian market is following the UK's lead on balance transfer offers 19
Conclusion 19
Credit card ownership and usage 21
Many consumers hold multiple cards and maintain long relationships with their card issuer 21
Almost one-third of consumers hold more than one credit card 21
Men are more likely to hold two or more cards than women 22
A consumer's relationship with a card issuer usually lasts more than five years 24
Growth in the credit card market over the next 12 months will come from existing cardholders 25
Wide credit card acceptance and frequency of usage drive spending 26
Overseas transactions and clothing and footwear drive credit card usage 26
Overseas card usage is driven by convenience and wide acceptance 28
Men are more likely to use a credit/charge card than women for many types of purchases 28
Young adults are least likely to identify their credit card as a common payment method 29
Consumers generally seem to be keeping their card spending in check 30
Men spend more on their main credit card than women 30
Consumers aged 45-54 are the biggest spenders on their main credit card 31
Victorians spend more than Queenslanders on their main credit card 32
High earners spend heavily on their credit cards 32
Many consumers do revolve a card balance from month-to-month 33
More than half of cardholders fail to pay off their credit card balance in full every month 33
Women are less likely than men to pay off their balance in full each month 34
Older consumers are most likely to repay their card balance in full each month 35
Lower earners are less likely to clear their card balance each month 35
One- in-four cardholders admits to using their card to make purchases they could not afford 37
Consumers do not see revolving a balance as 'borrowing' 37
Consumers are comfortable with their credit limits 38
More than 40% of consumers have a credit limit of less than $5,000 38
Almost 80% of consumers believe that their credit limit is at the right level 39
Younger cardholders are more likely to believe that their credit limit is too low 40
Few consumers have consolidated debts onto their main credit card 41
Conclusion 42
Influences on credit card choice 44
Fees and rates are big factors influencing card choice 44
More than 80% of consumers believe that low rates are an appealing feature when choosing a new card 44
Low fees are important to all age groups while the importance of other features decreases with age 45
Balance transfer offers appeal to 45% of consumers 46
There is consumer indifference towards reward schemes 47
More than one third of cardholders do not see the value in rewards schemes 48
Almost half of cardholders say that the opportunity to earn points does not increase their card spending 48
Only around one-quarter of cardholders say that they try to redeem points at least once per year 49
Many cardholders feel that the benefits of their reward scheme are outweighed by the annual fee they pay 50
Reward schemes are failing to engage consumers 51
The different attributes of banks and non-banks influence choice of card provider 52
Existing relationships give banks the advantage 52
Rewards schemes do win some customers 53
Rewards drive acquisition for Amex 53
The non-banks are winning business based on a low rate, low fees proposition 54
Younger consumers are most likely to choose a provider based on a low cost proposition 55
Many consumers choose to bundle their financial products 56
Gifts, endorsements, affinity partnerships and telephone sales do not win business 57
Competition and aversion to high fees and rates drive card cancellation 57
Consumers will cancel a credit card if they receive a better offer 57
High interest rates drive card cancellation 57
The annoyance of annual fees also drives card cancellation 57
Poor service is more likely to drive a man to cancel a credit card than a woman 58
High interest rates are most likely to cause consumers in their 30s and 40s to cancel their credit card 58
Conclusion 60
Attitudes towards credit card providers 61
Consumers display high levels of satisfaction towards credit card providers 61
Almost two-thirds of cardholders are satisfied with their credit card provider 61
Women are more satisfied with their main credit card provider than men 62
Uncompetitive pricing and high fees are again key sources of dissatisfaction 62
Credit unions win the customer satisfaction stakes 63
More than 50% of consumers holding credit union credit cards are very satisfied 63
The big four achieve similar levels of customer satisfaction 64
Consumer inertia makes market entry by non-traditional providers difficult 65
Consumers strongly favour traditional providers 65
73% of consumers would take out a credit card issued by a bank, but only 4% would do so from a utility company 66
Consumers are also unwilling to purchase other financial products from non-traditional providers 67
Conclusion 67
Effectiveness of credit card sales channels 68
The internet is an effective secondary credit card sales channel behind the branch 68
Face-to-face remains the preferred sales channel 68
The internet is proving an effective credit card sales channel 69
Younger consumers are more inclined to arrange their credit card over the internet 70
Men are more likely to use the internet to arrange a credit card than women 70
BankWest and Citigroup are among those players benefiting most from the online channel 71
More consumers would like to arrange their credit card online 72
41% of consumers aged 35-44 would like to arrange their credit card online 73
Only 32% of consumers say they would never arrange a credit card online 74
Conclusion 75
APPENDIX 77
Data tables 77
Market Overview 77
Credit card ownership and usage 79
Influences on credit card choice 91
Attitudes towards credit card providers 95
Effectiveness of credit card sales channels 99
Further reading 101
Ask the analyst 101
Datamonitor consulting 101
Disclaimer 101
List of Tables
Table 1: Credit card balances outstanding, 2002-2007 77
Table 2: Number of credit/charge and multi-function cards on issue, 1994-2007 77
Table 3: Number of credit card purchases, 2002-2007 78
Table 4: Credit card balances outstanding by card issuer, December 2007 78
Table 5: Card scheme shares of total number and value of purchases, December 2007 78
Table 6: BankWest credit card balances outstanding, 2002-2007 79
Table 7: Number of credit cards held by consumers 79
Table 8: Number of credit cards held by consumers, by gender 79
Table 9: Number of credit cards held by consumers, by state 80
Table 10: Number of credit cards held by consumers, by age 80
Table 11: Number of credit cards held by consumers, by personal income before tax 80
Table 12: Length of time cardholders have held their main credit card 81
Table 13: Consumers planning to take out new financial products in the next 12 months 81
Table 14: Payment method used most commonly when abroad 82
Table 15: Percentage of consumers indicating that their credit card is their preferred payment method for different purchase types, by gender 82
Table 16: Percentage of consumers indicating that their credit card is their preferred payment method for different purchase types, by age 83
Table 17: Credit card spending per month 83
Table 18: Credit card spending per month, by gender 84
Table 19: Credit card spending per month, by age 84
Table 20: Credit card spending per month, by state 85
Table 21: Credit card spending per month, by personal income before tax 85
Table 22: Proportion of balance of main credit card paid off each month 85
Table 23: How often cardholders pay interest on their main credit card, by gender 86
Table 24: Proportion of balance of main credit card paid off each month, by age 86
Table 25: How often cardholders pay interest on their main credit card, by age 86
Table 26: Proportion of balance of main credit card paid off each month, by personal income before tax 87
Table 27: How often cardholders pay interest on their main credit card, by personal income before tax 87
Table 28: Consumers' views on the following statement - "I sometimes buy things I cannot really afford on my credit card" 88
Table 29: Consumers' views on the following statement - "I only use my credit card for making purchases, and never to borrow money" 88
Table 30: Credit limits held by cardholders with personal income before tax of less than $20,000 88
Table 31: Views on credit limit on main credit card 89
Table 32: Views on credit limit on main credit card among cardholders aged 18-24 years 89
Table 33: Consumers who have consolidated debts on their main credit card 89
Table 34: Consumers who have consolidated debts on their main credit card, by personal income before tax 90
Table 35: Consumers who have consolidated debts on their main credit card, by age 90
Table 36: Features consumers regard as appealing when choosing a new credit card 91
Table 37: Features consumers regard as appealing when choosing a new credit card, by gender 91
Table 38: Features consumers regard as appealing when choosing a new credit card, by age 91
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" 92
Table 40: Percentage of cardholders who chose their credit card provider due a low interest rate on purchases or no fees, by provider 92
Table 41: Percentage of cardholders who chose their credit card provider because they wanted to bundle their financial products 92
Table 42: Reasons why consumers cancelled their last credit card 93
Table 43: Reasons why consumers cancelled their last credit card, by gender 94
Table 44: Reasons why consumers cancelled their last credit card, by age 95
Table 45: Consumer satisfaction levels towards main credit card 95
Table 46: Consumer satisfaction towards providers of financial products 96
Table 47: Consumer satisfaction towards main credit card provider, by gender 96
Table 48: Consumer satisfaction towards main credit card provider, by age 96
Table 49: Reasons why consumers are dissatisfied with their main credit card provider 97
Table 50: Consumer satisfaction towards main credit card provider, credit unions 97
Table 51: Consumer satisfaction towards main credit card provider, 'big four' banks 98
Table 52: Willingness of consumers to consider credit cards offered by different types of provider 98
Table 53: How consumers arranged their financial products 99
Table 54: Consumers who arranged their credit card in the branch or online, by age 99
Table 55: How consumers arranged their credit card, by gender 99
Table 56: Percentage of consumers whose main credit card is provided by the highlighted issuers that arranged their credit card online 100
Table 57: Percentage of consumers that would like to arrange their financial products online 100
Table 58: How consumers arranged their credit card compared to how they would like to do so, by age 100
Table 59: Make up of consumers who would never consider arranging a credit card online, by age 101
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 4
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 6
Figure 3: While younger consumers have embraced the internet, older consumers are not moving away from the branch so readily 7
Figure 4: Credit card balances outstanding now surpass $40 billion, with more than 70% of balances incurring interest 12
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 13
Figure 6: 1.35 billion credit card purchases were made on Australian credit cards in 2007, up by 6.2% in 2007 14
Figure 7: Westpac is Australia's largest credit card issuer based on outstandings, with 23% of the market 15
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 16
Figure 9: BankWest has enjoyed double digit growth in its credit card balances outstanding during each of the last five years 18
Figure 10: Almost one-third of consumers have two or more credit cards 22
Figure 11: 39% of cardholders aged 65 and over own more than one credit card, compared with only 13% of cardholders aged 18-24 23
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 24
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 25
Figure 14: Only 5% of consumers plan on taking out a new credit card in the next 12 months 26
Figure 15: 40% of consumers prefer to use their credit or charge when purchasing clothing and footwear or when overseas 27
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 29
Figure 17: Only 13% of cardholders spend more than $2,000 per month on average on their main credit card 30
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 31
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 33
Figure 20: More than 30% of cardholders only manage to repay less than half of the balance of their main credit card each month 34
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 35
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 36
Figure 23: One-in-four cardholders admits to using their credit card to buy things they cannot afford 37
Figure 24: Cardholders do not see revolving a credit card balance as borrowing - only 13% of cardholders admits to borrowing on their card 38
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 39
Figure 26: Four out of five cardholders are happy with their current credit limit 40
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 41
Figure 28: Only 11% of cardholders have consolidated credit card and/or personal loan debt onto their main credit card 42
Figure 29: More than 85% of consumers believe that lower fees are an appealing feature when choosing a new credit card 45
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 46
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 47
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 48
Figure 33: Reward points do not encourage card spending - 49% of cardholders do not spend extra just to earn points 49
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 50
Figure 35: 43% consumers feel that the annual fee on their card outweighs any benefit they receive from the card's reward scheme 51
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 53
Figure 37: More than half of American Express cardholders chose the card because of its rewards scheme 54
Figure 38: Low rates and fees are winning business for Virgin, Aussie and Wizard over the 'big four' 55
Figure 39: 25% of Westpac cardholders chose the bank because they could bundle their financial products 56
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 58
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 59
Figure 42: Consumer satisfaction towards credit card providers is high but is lower than towards the providers of other financial products 62
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 64
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 65
Figure 45: Consumers are generally unwilling to consider a credit card from non-traditional providers including utilities and supermarkets 66
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 69
Figure 47: While younger consumers have embraced the internet, older consumers are not moving away from the branch so readily 70
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 71
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 72
Figure 50: More consumers would like to arrange their credit card online than any other financial product 73
Figure 51: More consumers would like to arrange their credit card online than are currently doing so, particularly among older consumers 74
Figure 52: Consumers who are unwilling to use the internet to arrange a credit card are most likely to be aged 65 and over 75