We're world leaders in credit card nous

By PAULA OLIVER

New Zealanders are putting more on the plastic than ever before, but there are claims they also rank among the most savvy card users in the world.

Card-related behaviour was laid bare yesterday when the first major study of credit card use in New Zealand, commissioned by Visa, came out.

The detail shows a remarkable turnaround in the way credit cards are used.

Transactions doubled in the past five years as users moved from putting only large appliance-type buys on their cards to charging items such as groceries and alcohol.

Thirty-seven per cent of account holders paid off their balance in less than three months and mostly avoided eye-watering interest charges - a proportion greater than that of Australia and other countries.

Visa New Zealand country manager Belinda Leonard said the analysis of 1.1 million accounts showed the notion that users were drowning in debt was a myth.

"This has reinforced a lot of our beliefs. It's shown how behaviour has matured and how banks have matured in their practices. New Zealanders are, in fact, very savvy users of credit cards."

Reward schemes contributed to the change in behaviour, she said. Many people now intentionally put almost all purchases on a credit card to gain the benefit of points.

Some also did so to avoid bank fees, although a customer with a bank mortgage often could negotiate a no-fee agreement.

People who paid little or no interest were shown to make significantly more transactions than those paying interest.

In New Zealand, 67 per cent of adults have a card. By contrast, the figure in Australia is 55 per cent, Hong Kong 51 per cent, Singapore 35 per cent, and Korea 27 per cent. In Japan, a whopping 92 per cent of adults have a credit card.

Visa yesterday said the research also dispelled widely held views that credit cards spurred financial problems.

The cards accounted for only 4 per cent of total household debt, Belinda Leonard said, and only 0.3 per cent to 0.5 per cent of sales and advances were eventually written off through non-payment.

"That is a low figure. The banks filter out a lot of the applicants who might struggle."

Younger people tended to be those who struck problems, she said. Many had small limits on their cards, but lacked the know-how to operate them responsibly.

The survey indicates people whose credit card limit is $2000 or less are eight times more likely to have a bank terminate their card than those with high limits of $21,000 or more.

This showed banks were responsibly extending credit to the customers who could afford it, Visa claimed.

Illness, loss of job or a relationship break-up show up as the most common reasons for serious credit card and overall difficulty.

Airline tickets, appliances, groceries, alcohol and clothing are the top credit cards buys.