Credit card balances rose in May, driven by a combination of growing confidence in the jobs market and rising difficulty in making ends meet.

According to data recently released by the Reserve Bank, the average balance on credit cards rose 5% on an annual basis, the biggest surge in 25 months. On a monthly basis, the average balance in May rose to $3,248.60, an increase of $14.60 in the month.

“There have been some subtle shifts in consumer land,” said Craig James, chief economist with CommSec. “Consumers may be using credit cards again because they are finding it hard to make ends meet. Certainly home loan repayments have been rising.

“But it may also signal some thawing in the conservative behaviour that consumers have been displaying over the past year or so.

“On balance it looks like a combination of both. Consumers are indeed shopping around for bargains, but with the job market firmer, they appear to be willing to put their credit card to greater use alongside with their debit cards—their own money.”

The data breakdown tends to support Mr. James’ theory.

Purchases on credit card by number of transactions increased 6.3% in May, following a decline of 11.5% in April. Cash advances, one of the most expensive forms of credit, rose 2.4% on an annual basis, the first increase in 20 months.

Purchases on debit cards excluding cash out increased 3.3% in May, following a decline of 2.7% in April. EFTPOS debit transactions increased 11.1% annually, a slower pace than April’s 12.6%.

Also, the percentage of ATM withdrawals made at the card holder’s own bank increased to a record 62.6% in May, up from April’s 62.1%, as banking customers balk at paying a fee to access their own funds.

Source: http://www.perthnow.com.au/