Credit card market increasingly polarised

Credit card users are dumping their gold cards in favour of no-frills cards with low rates and fees. Those that still see value in rewards are using platinum and other premium cards.

The HSBC Credit Card Monitor, published yesterday, confirms other recent research which shows the credit card market being polarised as consumers reject gold cards.

According to HSBC, the number of Australian consumers using a "mid-range" (gold) card has fallen from 29 per cent to 15 per cent since 2009.

The number using a no-frills card (low interest rate, low annual fee or both) has increased from 63 per cent to 76 per cent over the same period

The number of people using a platinum or other premium card has remained steady at around eight per cent.

Last month, the Reserve Bank of Australia reported that reward programs offered with gold cards have lost value. The RBA report said that a shopper using a credit card with a rewards program needs to spend an average of A$18,400 to earn a $100 shopping voucher.

In 2008, the average spend required to gain the same reward was $16,700, and in 2003 it was just $12,400.

The research group Canstar said in a recent credit card research report that "platinum is the new gold". Most of the rewards cards that received its highest rating were platinum cards.

HSBC Bank Australia's head of credit cards, David Walker, said consumers are being more realistic about their card use. If they are not going to spend enough to earn rewards they want a card that is cheap to use.

If they spend enough to accumulate a meaningful number of reward points they want a good earn rate, he said.

HSBC's report shows that the number of people intending to apply for a credit card has dropped sharply. In 2010, 21 per cent of card users said they intended to apply for a new card, but in 2011 that number had dropped to nine per cent.

Nine per cent of people said they had cancelled a card in the past 12 months. People hold an average of 1.6 credit cards.