The cards that are running out of pals

Until recently, Australians seemed determined to spend more on credit cards, despite the well-known disadvantages of doing so.

Never mind the often exorbitant interest rates or annual fees that can run into the hundreds of dollars, consumers just kept "paying on plastic".

In the heady days of the early 2000s, credit-card spending surged by a phenomenal 25 per cent a year. Even during the global financial crisis it grew at 5 per cent a year.

Today, however, it's a different story. The value of national credit card debt has fallen from more than $50 billion last year to $48.7 billion, and the average balance is shrinking.

What's led to the change of heart?

There's little doubt households have become more prudent with their finances, and are more wary of all types of debt.

But there are other reasons consumers are turning away from credit cards. The fact is, credit cards used to be hard to avoid because they offered a range of services that were hard to get elsewhere.

In recent years they've lost many of these advantages.

If you were travelling overseas and wanted easy access to money, for instance, a credit card was often the simplest solution. Today, you can just as easily use a debit scheme card, which allows you to spend your own savings via the Visa or MasterCard network.

Rapid changes in technology have also made credit cards less of a necessity. In the early days of online shopping it was often easiest to pay on credit. Now there is a plethora of other options, ranging from debit cards to PayPal.

"Contactless" payments that allow you to tap your card on the terminal, rather than swipe it and sign or enter a PIN, are also making debit cards more popular as a substitute for cash when making small purchases such as a cup of coffee.

In a few years, you might not need a card at all. Companies such as Google are developing applications that allow people to pay for things with their smartphones, known as a "digital wallet".

The government has also played a role. Last year companies were banned from offering higher credit limits to borrowers without their prior consent.

But what about all the "rewards" schemes heavily promoted by credit card companies? This is one area where credit cards still hold the upper hand.

However, a Reserve Bank report last year confirmed what many suspected - the generosity of these schemes has quickly deteriorated. To qualify for a $100 shopping voucher, the Reserve said you needed to spend an average $18,000 on a card, an increase of nearly 50 per cent on the $12,400 in spending needed to claim a voucher in 2004.

All up, it seems there is less to be gained from the "extras" that come with owning a credit card.

The main thing that sets credit cards apart is their ability to let their users go into debt in a matter of moments.

And that's something fewer and fewer people want to do.