Shoppers leaving more 'on the plastic card'

New Zealanders have stopped improving the amount of their credit card balances they pay off each month in a fresh sign that intense pressure on disposable incomes is forcing consumers further into debt.

Figures released by the Reserve Bank of New Zealand show total credit card advances outstanding increased 7.2 per cent to NZ$5.092 billion at the end of February from the same month a year ago.

That annual growth rate has blipped up in recent months after hitting a low of 4.8 per cent in April last year.

The growth in credit card outstanding balances has contrasted with a slowdown in retail spending, suggesting that consumers are using their cards to bridge the gap in disposable incomes created by higher petrol, food and mortgage costs.

The initial signs of stress are clearest in the figures showing the proportion of outstanding balances paid off before high interest costs kick in. This figure has been declining since 2002 as consumers become more aware of the high costs of credit card debt and ensure their balances are paid off before the interest free period ends and high interest rates kick in. But that improvement has clearly bottomed out through 2007 and is now climbing again.

The proportion of credit card balances that is interest bearing rose to 68.4 per cent in February from 67.7 per cent in January and is up from a low of 66.4 per cent in May 2007.

- INTEREST.CO.NZ