Applications for credit cards have spiked by 13.5 per cent in the March quarter, says credit information company Veda.

Consumer confidence in credit cards has been buoyed by the Reserve Bank’s decision to leave interest rates on hold and innovative offers from the banks.

Angus Luffman, general manager of Veda, says that credit card applications are the strongest they have been since 2006; yet overall debt remains about the same.

Zero interest balance transfer deals, contactless payments, and the ease and flexibility of credit have been very appealing to Australian consumers. Moreover the official interest rate cut, spilling over from February, means “a lot of major credit card issuers are running low-interest or balance-transfer campaigns at the moment,” said Mr. Luffman.

The Reserve Bank is keeping a very close eye on Australian household debt. Recent figures reveal the nation currently owes a combined $51 billion on credit cards alone. Of this $33 billion is accruing interest.

With average credit card interest rates varying between 17 and 20 per cent, providers are raking in a cool $540 million each month.

Despite the huge profits financial analysts believe the current competition is good for consumers. “We are seeing much better offers being brought to the market,” said David Boyd, co-founder of creditcardcompare.com.au. “You have got zero per cent for up to 24 months on a balance transfer.”

But Mr Boyd warned that credit cards are like a double-edged blade – they can cut you when used improperly. “Credit cards are wonderful when used properly, but if people aren’t diligent and disciplined in how they use these things they can burn a hole in your pocket.

“Always pay more than the minimum repayment. Don’t get trapped in the cycle of just repaying the minimum term as it will take forever to pay off.”

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