Defined Terms and Documents       

Credit Cardholders or Credit Card Users

Findings from Roy Morgan’s Single Source survey of over 50,000 consumers pa which includes detailed coverage of over 39,000 with major cards in "High incomes run up relatively less debt on major cards" - Dec 12, 2016 note:

"In the 12 months to October 2016, holders of major cards (VISA, MASTERCARD, AMEX) intended to carry forward to their next statement an average monthly debt of $19 billion between them. The main contributors to this were the lower-income card holders, who on average owed an amount equivalent to a much higher proportion of their incomes than the higher-income groups."

McKinsey Report -  May 2014 categorises 'Five Segments' of Credit Cardholders in the USA:

1:      Prosperous and content

Keep their finances in order, use credit cards for 59 percent of their purchases and love rewards; they dislike revolving debt. They look for convenience and minimum effort, preferring to “set it and forget it” rather than get closely involved with banks or card issuers.

2:      Deal chasers

Average revolving debt of $3,802— twice the average— move their balances around to chase the best transfer rates. This segment is the most likely to have a cobranded card (24 percent compared with 17 percent overall) and to pay an annual fee for a reward card (19 percent compared with 13 percent). Deal chasers are highly involved with financial products and nearly as satisfied with their financial situation as the prosperous and content segment (34 and 37 percent respectively, compared with 20 percent overall), and rank second in both income ($65,000 median) and financial assets ($150,000). Despite carrying higher debt, they are confident about managing it and view the economic outlook as positive. Use online banking frequently, with half making online transactions three times a week.  Acquiring and keeping these customers calls for a balancing act, as they see themselves as pitted against issuers in a win-or-lose game. Always striving to borrow at the lowest cost, they try to steal the bait from issuers’ traps without triggering fees or higher rates through mishaps or oversights.

3:      Financially stressed

Carry heavy credit card debt—nearly four times the average, at $7,453—and consider themselves unable to control their spending or stick to a budget.  Some are chronic spendthrifts; others are mired in circumstances that force them to borrow on credit cards to pay for essentials.  Seldom shop around for better places to put their outstanding balances and doubt they will ever get out from under their burden of debt. Expect financial trouble for themselves and the wider economy. Poorest among the segments, with just a quarter of the financial assets (a mean of $44,000) of the average cardholder. Credit plays a crucial role in satisfying this group’s day-to-day needs: keeping a roof over their head, paying for their daily commute, keeping a prescription filled. This is not a sustainable path, but they are unable to abandon it just yet.  Value simplicity and transparency in fees, rates and terms, but their biggest need is for something that no credit card offers: a mechanism allowing them to impose their own spending limits which would enable them to carry a credit card for larger purchases that take time to pay off, without fearing they might be tempted to use it for non-essentials.

4:      Recovering credit users

Avid budgeters who pride themselves on keeping their financial house in order, although they still revolve an average balance of $1,726.  Wary of financial institutions, avoid the stock market as too risky, fear their bank deposits are unsafe and blame issuers when consumers accumulate debts and fees they are unable to pay off. Avoid using credit cards for routine purchases and seldom respond to zero-percent teasers or high-reward offers. They prefer to deal with bank staff in person and are less likely than other segments to use online banking, with just 49 percent doing so.  This group’s adversarial view of issuers suggests they need reassuring that they can use a credit card without stumbling into a “gotcha” fee or triggering a penalty rate.  Need a product that helps them budget and manage their spending—for instance, by allowing them to define spending “buckets” for various merchant types with monthly limits (e.g., $200 at grocery stores, $80 at mass merchants and $150 at restaurants).

5:      Self-aware avoiders

Avoid using credit cards, although they blame themselves rather than issuers for their debt problems and worry about the damage they could do to themselves with a credit card. Use debit cards and cash for three-quarters of their POS purchases.

Numeracy And Literacy Range Of Australians explains that only slightly over half the Australian population possess the minimum required Financial Literacy and numeracy skills of level 3 "...to meet the complex demands of everyday life and work in the emerging knowledge-based economy".   ABS 4228.0 2006  page 5

Financially Educated Australians are ranked level 3, level 4 or level 5 in the -

*        Productivity Commission's Staff Working Paper Links Between Literacy and Numeracy Skills and Labour Market Outcomes dated Aug 2010;

*        Australian Bureau of Statistics' Adult Literacy and Lifeskills Survey (ALLS) - 2006; and

*        Australian Bureau of Statistics' Survey of Aspects of Literacy (SAL) - 1996.

Unlike the Wholesale Supply Side where all the parties (Credit Card Issuers, Card Acquirers and Merchants) have powerful lobby groups to protect their commercial interests, the Retail Supply Side contains exceedingly powerful and too often unscrupulous participants amongst the Credit Card Issuers, whereas almost 8 million Australian Credit Cardholders have no lobby group to protect their commercial interests because Australia's Principal Regulator of the Payments System, namely the RBA considers that "The Payments System Board of the Reserve Bank has no regulatory power over these aspects of credit cards", notwithstanding Unconscionable Conduct by some Credit Card Issuers as evidenced in Labyrinth of ‘Concealed Spiders’.