Credit card spending lifts after record lockdown drop

Tuesday, 23 June 2020

The key to getting out of credit card debt is to act early, before it gets out of hand.

After a month with our credit cards kept in our wallets, New Zealanders were out and spending again in May, new data shows.

Reserve Bank statistics show the total amount spent on credit cards rose by 54 per cent from April to May, to $3.2 billion.

That was after a 41.3 per cent drop between March and April, the biggest fall on record. In April, just $2.1 billion of spending was put on credit cards.

Despite the lift, credit card spending was still 21 per cent lower than in May 2019.

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The data includes some of level 3, when our spending options were still limited.

New Zealand’s credit card debt increased from $5.7 billion to $6b in May. That’s the first time it was below $6b since 2013.

Data from comparison site Finder found that 17 per cent of New Zealanders said they could not manage their finances without a credit card.

Aucklanders were the most likely to use a credit card for daily expenses.

“After the onslaught of Covid-19, it's a relief to see that things are gradually returning to normal, including our spending levels,” said Kevin McHugh, Finder’s publisher in New Zealand.

“With restaurants, pubs and shopping precincts now open, many people are opening their wallets after months of going without.

“We’re starting to see steady economic improvement as restrictions ease, which is essential after our catastrophic quarter,” he said.

“It’s great to get out and about after months of being cooped up at home, and consumer spending is more important than ever to the New Zealand economy.

“But Kiwis were able to lower their credit card spending throughout the lockdown, which shows that it's possible to cut back on credit and unmanageable debt.

“Those who prefer to use credit should ensure they’re using a card that works for them.”

Infometrics economist Gareth Kiernan said the numbers included some of level 3, when options to spend money were still restricted.

June would give a better indication of what was happening, he said, and other data indicated spending was back to level “more or less” where it was a year ago.

“What is probably interesting is that it doesn’t really show any widespread post-lockdown spike in spending some people have talked about.”

That was consistent with the state of the economy and job market, he said, but meant there was no 'catch-up' for businesses that had struggled through level 4.