The report found that since 2016 the percentage of consumers who believe that credit is an enabler to buy the things they want has decreased only marginally from 47.4% in the 12 months to December 2016, to 47.2% in the 12 months to June 2020.
This may even be masking the extent of comfort that New Zealanders have to spend money they don’t currently have, as some people don’t regard using a ‘buy-now, pay-later’ scheme as a form of credit.
ANZ’s internal customer data shows that when it comes to repayments an increasing number of ANZ credit cardholders are paying off their balances in full each month.
It is a trend that began with the Global Financial Crisis and has accelerated with COVID-19. Since the start of the COVID-19 pandemic there has been a 12% increase in the number of customers who pay off their card in full each month.
”Credit Cards can be useful to manage cash flow for short periods, and for customers who want flexibility around their repayments,” Mr Kelleher says.
“But there are other options for borrowers, and it is important that people choose a product that is right for their circumstances.
Personal loans can be helpful for customers where a structured debt repayment would help them – particularly people making large purchases or wanting to consolidate debt.”
Credit cards that offer customers other benefits – like travel insurance, or cashback on their spending – generally carry a higher interest rate.
“These cards are more appropriate for customers who are likely to be able to pay off their card every month,” Mr Kelleher says.
People often wonder why credit card interest rates are higher than mortgage or deposit rates.
The higher rates reflect the fact credit cards offer relatively small lines of unsecured revolving credit. When a loan is unsecured it means the loan is not secured against any of the borrower’s assets.
This typically means the amount borrowed will be less and the interest rate will be higher.
In contrast a secured loan, such as a mortgage, will be secured against some or all of the borrower’s assets. If the borrower fails to make repayments the lender may get some or all of those assets to cover the outstanding loan amount.