Credit card usage in Australia has been on the decline since 2018, notwithstanding a brief resurgence in 2023. By March 2024, the number of credit cards in circulation was approximately 12.1 million, bearing a national debt with interest totalling $20.1 billion. Research funded by a BNPL service, Afterpay, highlighted that 84% of Australians deemed credit cards to be financially hazardous.
The trend underscores a significant transition in how young Australians manage their financial commitments. Unlike credit cards, which can lead to large cumulative debts owing to high interest rates, BNPL services usually offer a capped structure with no interest fees if payments are made on time. While credit cards may facilitate spending beyond one's means, younger Australians are shifting towards solutions they consider more predictable and less financially trapping.
The financial implications are considerable. As Gen Z turns away from credit cards, financial institutions may need to reconsider how they market credit services to younger consumers, potentially adapting to meet the demands for more flexible and transparent financial products.
Future discussions in the financial sector could focus on regulatory measures for BNPL services to safeguard consumers. As financial habits continue to evolve, the preference for BNPL over traditional credit suggests a reshaping of personal finance dynamics in Australia, influencing policies and prompting banks to reevaluate traditional lending models.
