Consumer resistance to increasing debt continues

Mastercard is touting credit cards as a simple way of getting through the financial crisis, even though use of the plastic is slowing.

Yuwa Hedrick-Wong, Mastercard's economic adviser, said credit cards offered cheap, short-term loans - particularly for small businesses - without the hassle of applying for a personal loan.

"The benefit offered to the consumer to acquire a short-term loan anytime and anywhere without any security coverage is not available on any other payment option except the credit card," said Hedrick-Wong.

"The importance of the option for a consumer to borrow for short-term needs is more significant today as the global economy is heading into a period of constrained credit."

He said credit card holders benefited from the "float" period - up to 45 days - between purchase and payment, the option to freely borrow at point-of-sale, rewards programmes and ease of record keeping.

But New Zealand consumers appear to be erring on the side of caution, with statistics from the Reserve Bank and Statistics New Zealand showing a slowdown in the amounts being put on credit cards.

Credit card billings for February were down 6.4 per cent on the previous year. The March figures for electronic transactions, which include all debit, credit and charge card transactions, were down 0.5 per cent mainly because of a drop off in fuel, travel and health purchases.

The statistics are in line with overseas trends.

Consumer borrowing in the US fell at an annual rate of US$7.48 billion ($13 billion) in February, or 3.5 per cent, compared with January.

- Additional reporting, agencies