Shoppers splash out $21bn on their credit cards

CHRISTMAS shoppers pulled out their plastic, spending a record $21 billion using their credit cards in December.They are also paying their cards off faster than before.

Credit card spending was 5.6 per cent higher than a year previously, which is stronger growth than the 2.1 per cent increase in retail sales overall.

However, the government's $10.4bn cash handout last year meant that many people paid off their credit cards.

Consumers are still cautious about the debt they build up on credit cards. An analysis by card operator Mastercard shows that only 70.8 per cent of the total $46.9bn in credit card debt is accruing interest, which is the lowest level in a year.

The level of credit card debt accruing interest is only 2.9 per cent higher than a year ago, less than the rise in inflation.

Consumers are becoming more reluctant to use their credit cards for cash advances. The value of cash advances in December was 13 per cent lower than a year earlier.

Mastercard said that the growth in credit card limits had also been falling sharply since early 2007, rising by only 3.5 per cent in the year to December.

This compares with annual growth rates averaging in excess of 12 per cent in the previous five years.

The full value of credit card transactions over 2009 was 2.5 per cent above the level of 2008.

Although consumer confidence has risen strongly over the past six months and is above its long-term trend, the Reserve Bank's three interest rate rises late last year have taken their toll and contributed to relatively weak Christmas sales.

Economists expect rising employment and the recovery in housing construction will bring improved consumer spending in the year ahead.