Millennials shop around for credit cards as spending patterns change

Millennials shop around for credit cards as spending patterns change

As spending habits shift due to COVID-19, millennials are shopping around for another credit card, with reward programs topping their wishlists.

Nine per cent of millennial cardholders have changed from their main credit card to another in the past 12 months, new research from J.D. Power showed. The study defines millennials as those aged between 18 and 39 years old.

Almost 40 per cent of switchers say they replaced their credit card with one with a better rewards program.

And while Australians may be feeling better about their personal financial situations, nearly half of millennials with credit cards are spending less on their plastic due to the pandemic. The age group accounts for 21 per cent of cardholders in Australia.

It’s not just millennials who are relying less on their plastic. Credit card spending fell $5.82 billion, or 25 per cent, in the 12 months to May 2020, the latest data from the Reserve Bank of Australia (RBA) showed. 

Intentions to switch cards are strong, with more than one in five millennials having their eyes on changing in the next 12 months. This is double that of older cardholders, with one in 10 of those aged 40-plus wanting to switch cards.

A third of surveyed millennials said they want to change to a credit card that has a better rewards program and better benefits, while a quarter said they wanted to avoid paying an annual fee.

Changed spending patterns

Bronwyn Gill, head of banking and payments intelligence at J.D. Power Australia, said today’s millennials are savvy and are weighing up their credit card options for one that accommodates their new spending habits

“However new spending habits are directly influencing the ability to accumulate and redeem rewards,” she said.

As consumers look to better plan their expenses and seek different ways to make payments, 37 per cent of Australians say they have used buy-now-pay-later (BNPL) or instalment plans to manage their finances in the past six months, a survey commissioned by American Express found.

More than half of those surveyed have thought about taking out small personal loans, while a third considered using lay-by on in-store instalment plans.

In light of changing spending patterns, American Express has introduced a new instalment feature, called Plan It, which comes built into some of the company’s credit cards. 

Unlike BNPL services, where a purchase may be split into multiple payments, Plan It users can create instalment plans against their own credit card balances of $150 or more. The payment plans can be spread over three, six, nine or 12 months. Users may need to pay a fixed monthly fee but zero interest.

Austin Huntsdale, vice president of consumer lending at American Express, said the new instalment feature may help people who want more control over their finances and are seeking financial flexibility. 

“Australians are looking carefully at their personal finances. They’re planning more diligently to be able to absorb unexpected expenses,” Mr Huntsdale said.

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Learn more about credit cards

Increase your credit card limit with Westpac

A credit card can be a useful tool to access extra cash when you need it. Sometimes you may wish to increase your credit card limit for greater financial flexibility. For example, to realize your immediate goals faster, such as planning for an international holiday or making a big purchase.

You can apply to increase your credit limit at any time, and most credit card providers have made it really easy to do so. You can use your online banking portal, the credit card provider’s mobile app, or even the telephone. 

Applying online to increase your credit limit with Westpac is the easiest option if you’ve already activated Westpac Live Online Banking. All you need to do is fill in the required information and then hit ‘submit’ to apply for an increase in your credit card limit.

Most banks will ask for details of your financial situation at the time of applying for a credit increase. This is done to ensure your new limit meets the lender’s criteria. 

You can apply for increasing your credit limit in any of the following ways:

  1. Visiting your nearest Westpac branch
  2. Calling Westpac on 1300 651 089
  3. Logging in on Westpac Live Online Banking

How do I apply for a credit card online?

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

Current Annual Fees

These are the current annual fees on your existing credit card.

Monthly repayment

This is how much you can afford to pay on a monthly basis off your credit card. You can enter any amount you wish; but to make the balance transfer worthwhile the default is $200.

How can I increase my Bankwest credit card limit?

When you apply for a Bankwest credit card, you get assigned a pre-set credit limit, which will end up being the most that you can spend on your credit card before having to pay it off. Your credit limit is chosen for you and your current financial situation, and you should remember not to overspend, irrespective of the limit, in order to avoid racking up a massive bill.

However, banks and lenders understand that your needs will change, and have made it possible for you to increase your credit card limit, allowing you to get extra cash when you need it most. Moreover, with a higher spending limit, you may be able to get access to certain perks and benefits with your Bankwest credit card.

To increase your Bankwest credit card limit, you can visit any of the bank’s branches or call 13 17 19 and follow the steps outlined.

Current Interest Rate

This is the current interest rate on your existing credit card.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.