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Credit card demand on the rise

credit cardA marketing drive by major credit card issuers appears to be working.

New figures show that demand for the plastic has soared 13.5 per cent in the past year, the strongest activity in nearly a decade.

Such interest was further fuelled by the interest rate cut in February, credit data provider Veda says.

While this may raise a few eyebrows at the Reserve Bank as it contemplates the need for another rate reduction, Veda’s GM of consumer risk, Angus Luffman, says there is an emerging trend in the changing nature in card use.

Rather than using them for new borrowing, credits cards are increasingly being used as payment tools with people making repayments on existing purchases.

Consumer confidence also improved immediately after the rate cut, contributing to card demand, despite weakness in the labour market.

However, demand for personal loans fell 5.2 per cent in the year to March, albeit a marginal improvement on the 5.9 per cent decline in the 12 months to December.

Overall the Veda quarterly consumer credit index grew 3.9 per cent over the year, a marked increase on the 0.8 per cent rise as of December.

The index historically provides an early indication of movements in consumer spending.

Mortgage applications, not included in the index, rose 5.5 per cent over the year, also reignited by the interest rate cut, Luffman said.


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