Credit card spending up, but ‘cautious’

2011-02-04 09:19

Consumers are using their credit cards more following the recession, but their spending is “cautious”, a review released today showed.

“Although the worst of the recession is over, South Africans are still cautious about spending on their credit cards, which they used conservatively during the festive season,” head of Standard Bank’s credit card division Leila Fourie said.

The bank, which said it was the largest issuer of credit cards in South Africa, reviewed credit card use over recent months and found many people were reducing their outstanding balances, while spending less on high-ticket items.

Consumer spending on airlines was down, while the corporate segment had shown an increase of more than 10% on travel, off a low base.

“In lower and middle income groups, consumer spending patterns were erratic during 2010,” said Fourie.

“This changed from October with the bulk of transactions being recorded in department and clothing stores.”

Their airline spend dropped during the latter part of last year.

Upper income groups used their cards primarily in retail outlets ranging from department to jewellery stores. They also reduced travel and discretionary spend over the festive season.

Consumers had made increasing use of credit cards to withdraw money from ATMs since 2007.

Now they were found to be reducing outstanding debt in response to reduced interest rates.

“It was evident that bank customers were using thirteenth cheques and bonuses to pay down outstanding balances, rather than spend their extra income on luxuries.”

Fourie said consumers were increasingly using cash or debit cards.

“Consequently, fewer cardholders are defaulting on their obligations and the level of credit card bad debt is improving. Debt review, however, remains an industry concern.”

Macroeconomic indicators suggested the turnaround in card spending volumes this year would be lethargic, she said.

“While there has been a substantial increase in customers opening new credit card accounts at Standard Bank over the last 12 months, customers are using the product far more responsibly and are managing their debt more effectively,” she added.

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