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Credit Card eZine - News and Articles about Credit Cards

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Credit Debt Levels

Tuesday, February 26, 2008

While American consumers get used to carry heavy balances from month to month, and this idea is quite common for an average American cardholder, Australian consumers are highly concerned about credit card debts and do their hardest to pay them off.

Interestingly, Australian customers become more frugal with their plastics after two interest rate hikes, meaning customers pay off their credit card balances on a regular basis in order to avoid heavy credit card charges. Though they still use their plastics quite actively, and credit spending is on the rise, the total outstanding credit card debt is rising at a slow pace.

It's no secret that a state bank may take certain steps in the frames of its monetary policy. In the US, the Federal Reserve Bank cuts the fed rate to make the borrowings cheaper for banks. And oddly enough, thousands of cardholders discover sky-high interest rates on their plastics.

Meantime, the Reserve Bank of Australia aimed to slacken the pace of consumer spending by raising the interest rates. And it's worth mentioning that interest rate hikes have taken a toll on consumer behavior. They keep on charging on their plastics, but the total credit card debt climbs at the slowest annual pace.

According to statistics, the total credit card balance rose just by 9.5% for the 12 months period. Taking into consideration that the average increase is 17 per cent, we may conclude that Australian consumers tend to be more frugal with their credit cards. Let's take a brief look at the behavior of Australian cardholders after two interest hikes.

First and foremost, the use of cash advances on plastics went down by 2.3 per cent for the last eight months. That's no surprise, as cash advances incur pretty high interest rates. So, consumers avoid taking cash withdrawals.

Meantime, the amount of credit card purchases rose by almost 12% in December. In view of the fact that year-end time proves to be the strong retail season, it's no surprise that credit card purchases were on the rise. However, credit card spending declined in the US even despite dramatic fed rate cuts on the edge of Christmas retail sales.

The thing is, credit card repayments in Australia went up 5.5% in December, and that was a good sign. It shows that Australian consumers take their credit matters seriously and try to stay within their means by paying off their balances on a regular basis.

One of the surefire methods to avoid heavy credit card debts is to pay them off as soon as possible. That's just what Australian credit cardholders do. They actively repay their credit card debts, and it helps them avoid various problems associated with carrying heavy credit debts. All the more so, there was a 0.4% increase of the number of credit card accounts in December.

All in all, we may see that interest rate changes may have different effects in different countries. In the US, interest rate cuts may have the opposite effect, as many lenders suffer incredible losses and recoup these losses by slapping sky-high interests on their clients' balances. As for Australia, interest rate hikes have caused consumers to change their attitude to credit card debt.

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