Credit cards losing favour, especially with younger people, as digital payments rise in popularity

The number of people with credit cards is falling and the average age of credit card holders is rising, credit bureau Centrix says.

In its latest monthly credit indicator report Centrix says the number of people with a credit card has fallen steadily since 2019. Centrix says there are now about 1.99 million credit card holders, 12% fewer than in 2019. And over the same timeframe the number of borrowers holding multiple credit cards has fallen 45% to about 550,000.

Meanwhile, the average age of a credit card holder has increased by six years over the last decade to 57, with the average age of new customers relatively stable at about 42.

"This suggests the ageing profile of the credit card market is being driven largely by declining numbers of new customers, particularly younger borrowers, rather than a material increase in the age at which people first take out a card," Centrix says.

It says younger people are using credit cards less, instead favouring the likes of buy now pay later, digital wallets such as Apple Pay and Wise, alongside the increasing use of debit cards.

Another factor Centrix cites in the decline of the credit card is responsible lending obligations under the Credit Contracts and Consumer Finance Act.

"Younger borrowers have generally experienced lower approval rates as lenders have tightened affordability assessments. In addition, consumers holding multiple credit cards have increasingly consolidated or closed unused accounts to improve their affordability profile for future borrowing," Centrix says.

"The ongoing shift towards digital payments has accelerated the decline. The adoption of digital payment methods increased significantly during Covid and has continued to reduce the reliance on traditional credit card products."

Reserve Bank data shows total personal credit card advances outstanding of $5.428 billion as of May, with interest being paid on $2.75 billion of that. The weighted average interest rate on personal interest bearing advances was 19.9% in May, with the Reserve Bank saying this was the highest rate recorded since its data series began in July 2000.

In 2019 New Zealanders were paying interest on more than $4 billion of credit card debt.

Centrix says credit card arrears were at 3.8% in June, historically low levels and largely unchanged year-on-year.

*The charts below come from Centrix.