Entrepreneur Vincent Candrawinata thinks his generation needs to go on a finance diet.
The 27-year-old entrepreneur scientist is one of growing legion of people chopping up the credit card and using debit instead and he sees it as a way of ensuring he pays for what he needs not what he wants in the moment.
More BusinessDay Videos
- Video duration
- 02:41
Making credit cards work for you
Making credit cards work for you
Catherine Robson of Affinity Private shares three fundamentals of credit card management in an increasingly cashless society.
Up Next
NAB admits security breach
- Video duration
- 00:41
- Video duration
- 00:41
NAB admits security breach
NAB admits security breach
The bank says human error was to blame when it sent details of 65,000 customers to the wrong email address in December.
Up Next
Netflix's decade of streaming
- Video duration
- 01:50
- Video duration
- 01:50
Netflix's decade of streaming
Netflix's decade of streaming
It's now been 10 years since Netflix made its most important strategic shift away from mail-in DVDs and into Internet streaming.
Up Next
Australia set to join global reflation
- Video duration
- 03:38
- Video duration
- 03:38
Australia set to join global reflation
Australia set to join global reflation
With inflation increasing in Europe, the UK, US and China, we address whether Australia will join this growing list and what could it mean for the RBA. (This video was produced in commercial partnership between Fairfax Media and IG Markets)
Up Next
Unemployment rate rises
- Video duration
- 00:26
- Video duration
- 00:26
Unemployment rate rises
Unemployment rate rises
In a surprise to economists, the unemployment rate in December rose to 5.8 per cent, from 5.7 per cent in November. Vision courtesy ABC News 24.
Up Next
China's first ballpoint pen
- Video duration
- 01:01
- Video duration
- 01:01
China's first ballpoint pen
China's first ballpoint pen
China produces about 38 billion ballpoint pens a year, but the country has never, until now, been able to produce its complicated tip.
Up Next
Gillard and Obama butt heads over Vegemite
- Video duration
- 00:57
- Video duration
- 00:57
Gillard and Obama butt heads over Vegemite
Gillard and Obama butt heads over Vegemite
Back in 2011, former prime minister Julia Gillard was asked about Vegemite while visiting a US high school.
Up Next
Supermarket results: Woolworths could win sales race
- Video duration
- 01:59
- Video duration
- 01:59
Supermarket results: Woolworths could win ...
Supermarket results: Woolworths could win sales race
Fairfax's Catie Low explains predictions that Woolworths will shake off its 29-quarter losing streak to win the second quarter sales race.
Making credit cards work for you
Catherine Robson of Affinity Private shares three fundamentals of credit card management in an increasingly cashless society.
"It's very similar to a diet. You go on a diet because you want to protect yourself from the diseases associated with obesity, you stop spending to protect from debt," he says.
"I see a lot of people in my generation, millennials, who don't have that skill. Especially for young people, like some of my friends, they lack the basic skill of balancing the chequebook."
Related Content
Analysis of the latest Reserve Bank of Australia figures show the value of debit card transactions overtook personal credit card spending in November, the culmination of long-term drift away from credit.
Households have been increasingly reluctant to incur big debts on their credit cards since the global financial crisis, while the value that credit cards offer consumers has also deteriorated.
At the same time, advancements in debit cards have meant it is not necessary to hold a credit card in order to shop online, overseas, or to make tap-and-go payments.
The share of purchases made on debit hit 45 per cent in November, compared with 44.8 per cent on personal credit cards, according to analysis by Mike Ebstein of MWE Consulting. Credit cards owned by businesses and "charge cards," which must be paid in full every month, made up the remaining 10.2 per cent of this market.
Mr Ebstein compared this with early last decade, when the amount people spent on credit cards was about twice as much as their debit card spending.
"It's been progressive, but it's been accelerating. It's quite a dramatic shift," Mr Ebstein said.
Lei Lei Clavey, a 29-year-old digital marketer and blogger from Hawthorn in Melbourne's east, has struggled to keep out of debt in the face of big costs such as a wedding despite knowing it will cost her dearly in interest.
She swears has learnt that lesson now and is using lay-by and savings to pay for a trip to New York later this year as she tries to cut the credit cord.
"I'm sure I'm not alone when it comes to wanting to free myself of the credit card, but I've never spoken to my friends about it," she says.
"Other people I know don't own credit cards and I'm envious of their financial freedom. They don't owe anyone, unless they have a mortgage of course. These friends live within their means, only travelling when they can afford it or shop when they have the money to splurge."
The change has occurred against shifts in different generations' attitudes to debt, alongside a slide in the value that consumers get from having a credit card.
Credit card interest rates have often failed to fall in line with other rates on loans, and younger customers in particular are avoiding this type of debt. CommSec analysis shows the average credit card balance of $3,070 was at its lowest level in almost nine years.
A survey from Finder.com also found 40 per cent of Baby Boomers had planned to use a credit card to cover their expenses over the festive season, compared with 28 per cent for of Generation Y,
"For consumers that don't need credit and would prefer to spend their own money, debit cards are generally cheaper as no interest is charged on the account," spokeswoman Bessie Hassan said.
The glory days of credit card reward schemes, where banks offer perks such as frequent flyer points or vouchers for spending on credit, are also in the past.
Retailers have been allowed to charge customers a "surcharge" for paying on credit since 2003, while banks have also wound back their reward schemes in response to tighter restrictions on the "interchange fees" paid by credit card giants Visa and Mastercard to banks.
"As a result of Reserve Bank regulation, credit cards have become more expensive, and the reward schemes have become less rewarding," Mr Ebstein said.
Head of deposits and transactional banking at industry super fund-owned bank ME Nic Emery said the need to have a credit card had also been eroded by the rise of "scheme debit" cards. These are cards that use the Visa or Mastercard network to access a customer's savings.
"While both are still growing, debit card transactions are growing faster than credit card transactions simply because there is more opportunity to use debit cards now," he said.
0 comments
New User? Sign up