Reserve Bank statistics show banks increased their limits for credit card customers by a record NZ$98 million to NZ$17.675 billion in August, perhaps anticipating a spending spree ahead of the October 1 increase in the GST rate to 15% from 12.5%. This was the biggest increase in credit card limits in over two years.
But customers were reluctant to use the the extra credit offered, increasing their outstanding balances by just NZ$26 million to NZ$5.308 billion as an already heavily indebted household sector remains reluctant to increase spending despite the threat of rising prices.
Outstanding balances have been flat to falling for over two years.
There remains two weeks to run before the October 1 increase in prices, but retailers report relatively slow activity for bigger ticket items, apart from in Christchurch where many households are having to replace crockery and big screen televisions broken in the September 4 earthquake.
Reserve Bank figures show household debt as a percentage of disposable income remained elevated at 154% in the second quarter of 2010, albeit down from a peak of 158.8% in the third quarter of 2008 just before the Global Financial Crisis hit.
Household debt remains well above its levels in 2002 of around 110% of disposable income, just before a surge in foreign borrowing helped double house prices in the space of five years.
The Reserve Bank noted the household sectors preference for debt repayment rather than spending on consumer goods in its dramatic reduction in its growth outlook and its forecast interest rate track in its September Monetary Policy Statement.
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8 Comments
Rang up the BNZ the otherday, needed and extra 3k on my credit card limit for new kitchen, they said but you have 8k spare and I said yes but I will need 10k for my kitchen this month so I need to take my limit to $28,000, they wouldn't increase limit but happy to transfer 3k from other card.
Full amout is paid off every month, as has been done for past 15 years and will be done this month.
And they wonder why customers have a low level of tolerance for bank cock ups.
BNZ raised my limit 5 years ago before i pay attention that it said if i don't reply then that's a sign of approval.
then after that I am screening there mail like a hawk.
this month only i got two mailers about upgrading my credit card "same credit limit, different level" and then a telemarketing call as well, declined by me of course.
credit card is a wonderfull thing if you know your limit and pay it off every single month
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