Debit cards 'set to become more popular than credit cards'

Debit cards could be more popular than credit cards in 2010, according to a personal finance expert.

Australian consumers are beginning to rely more on their debit cards in a bid to avoid racking up more credit card debt, according to a market expert.

A recent report by the Reserve Bank of Australia revealed that card usage grew during November 2009, with the average outstanding balance rising from $3,141 in October 2009 to $3,196.

Consumers with credit cards with an interest free period had an average balance of $3,240, while the average balance on other credit cards was $1,565.

Despite the financial advantages of using 0% balance transfer deals and credit cards with an introductory interest free period, Savanth Sebastian, an economist for CommSec, predicted that consumers would move away from such products during 2010.

He told the Courier-Mail consumers had become more conservative during the economic downturn and that they are now wary of accumulating credit card debt.

"Debit cards will be the card of choice over 2010," said Mr Sebastian.

However, he added that credit card spending could rise in the latter part of 2010, as consumer confidence is likely to grow as the economy recovers.

By Joe Letts