Why do people prefer credit cards in the digital age?

/ credit report personal finance

Cheques are being pushed out into the cold.

Cheques: Does anyone still use them? According to the Australian Payments Clearing Association, not really. The most recent statistics have revealed that there has been a drop of 71 per cent in cheque usage over the last 10 years, as people choose to use alternative methods of transaction instead of the cumbersome chequebook1.

Meanwhile, the general manager of consumer risk at Equifax Angus Luffman describes how people are growing more familiar with the frequent use of credit cards.

"The latest [Reserve Bank of Australia] data on credit cards shows consumers are continuing to use their credit cards more as a payment tool, rather than a credit instrument beyond interest free periods," he explained in a July 14 media release2.

But just why are credit cards taking over the world of payments? What makes them so much more useful than cheques?

Are you using your credit card frequently?Are you using your credit card frequently?

A question of credit

It isn't just about the old-fashioned and lackadaisical nature of a cheque.

It's likely that everybody has been stuck behind somebody choosing to use a cheque at the supermarket or a shop - it is cumbersome, time-consuming and finnicky to get correct. Compared to the swipe and pin of a card, a cheque seems practically archaic in comparison. With payWave and the burgeoning developments in the world of mobile payments, it's understandable why people would be choosing to leave the chequebook at home3.

However, it isn't just about the old-fashioned and lackadaisical nature of a cheque, it's also about the use of building credit for the consumer. We currently live in an Australia where low interest rates are the norm, especially with the Reserve Bank setting the lowest official cash rate in history. As a result, it's easier than ever to take on and, more importantly, service your debt.

A CV for your finances

You do still need to be able to prove that you are a good risk for your lender. It doesn't matter if it's a mortgage, a personal loan or a credit card, you have to show that you are going to be able to pay back your debt. A big part of that is your credit report, which acts as a historical file on your repayment behaviour - good and bad.

You will often find that credit cards are some of the first debt-building products that Australians use, and as a result they can be the gateways toward a better mortgage later in life. Increased credit card use has to be mitigated with good repayment behaviour if you want to stay on top of your debt.

Credit cards are replacing the cheque, and are quickly becoming one of the most popular methods for daily transactions as well. But you have to stay on top of your repayments if you want to make the most of it! Start by checking out your Equifax credit report - it's the first step towards helping you to better manage your debt and credit card usage.

1APCA, Decline of Cheques

2Veda, Consumer Credit Demand Index June 2016 Quarter

3Visa, Visa payWave

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.​

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