1 June 2012
Veda, Australia's leading data intelligence and insights company has released data showing generational trends in credit activity over the past ten years which shows some surprising results.
One of the most compelling findings is the volume of financial defaults within the older generation (65 years and above), which have increased by 200% over the last ten years. This trend shows that Australia's older generation have become more reliant on credit which is leading to more defaults as a bigger proportion of this age group struggle to meet financial obligations.
The data also shows that credit cards are falling out of favour with Australia's younger generation, with the volume of applications reducing significantly in the last four years, with the decrease most prominent among 18-20 year olds. This decrease is narrowing the gap between the younger generation and baby boomers, who are increasingly showing similar appetites for credit as their older counterparts.
Despite a reduced appetite for credit cards, younger generations are not immune to credit defaults, as they are still more like to default than any other age group. Veda's data shows this to be particularly evident in the first quarter of the year as the effects of overspending during the holiday period start begin to hit home.
Veda's Head of Consumer Risk Angus Luffman said that education is needed within all age groups on the risks of being enticed into credit as a result of factors like low introductory interest rates.
"The fact is that consumers of all ages still fail to realise that missed monthly mobile phone, utilities, and credit card or loan repayments can all affect their credit rating. It is vitally important that consumers consider and understand the difficulties they could face when they take on credit commitments that they can't meet," said Luffman.
While there has been a marked increase in overall credit demand from older generations over the last ten years, demand among younger generations (18-24) peaked in 2008 and have now returned to similar levels as in 2002. Whilst they're still the largest age group to apply for credit this is further evidence that Australia's younger generation has a vastly differing attitude to credit than older age groups, or, the need for credit is being met through an alternative method- such as debit cards or PayPal options.
"It could be that young generations are opting for loans from family members as opposed to choosing credit cards. The data also shows that younger generations are waiting for a longer amount of time before they apply for large investments such as mortgages and car loans, which is contrary to the stereotype of them being a generation that is reliant on instant gratification," added Luffman.
Naturally, young people are less likely to make credit card enquiries whilst still living at home, yet when they move out to areas of urban development it can be seen that credit card applications once again rise, as do enquiries from areas where a lot of young professionals live in highly populated areas.