The " Credit " Era !

Buying household items on credit only really took off after the end of the second world war.  As factories rekindled from war production they started to churn out consumer goods and a fridge in the kitchen changed to a necessity rather than a luxury.  Old coppers in the laundry were replaced by washing machines - and when television arrived in 1956 that was the start of a mad buying frenzy across the entire nation.

Those were the days when " Hire Purchase " was all the rage.  It was a simple arrangement.  A finance company purchased the item you needed and as its owner, made it available to you in return for payments extended over many months.   Should you fall behind in those repayments you could expect a call by a repossession agent.  Many people referred to hire purchase as the "Never never " because to many folk it was everlasting debt.

Australia's banks were seeing a profit opportunity passing them by and in 1974 the miracle of Bankcard arrived on the scene.  The banks formed a mutual credit company and started posting out to their customers a small plastic card that could be used at a huge range of shops - to buy items on credit.   Credit limits were established and high interest rates were justified because these were personal loans.  This indiscriminate issueing of cards angered many people who had firm views on only saving and buying for cash as a moral rule.

Bankcard was only applicable within Australia and with the coming of the jet age and overseas travel it was quickly overcome by International credit card companies - and it ceased in 2006.  By this time the buying opportunities had extended to the Internet and warnings were sounding on the level of personal debt.  Some people were balancing debt over a number of card accounts and amassing debt that was unpayable.  The level of personal banruptcies increased sharply.

The recession of 2008 was a wakeup call to many people.   The housing price bubble burst and left many with a mortgage in excess of a realistic selling price. The job marker receded and salary levels retreated in most sectors.  Government bailouts prevented disaster, but at the expense of a huge national deficit from which we are still slowly emerging.  The average citizen is now much more cautious in adding to their personal debt level.

A phenomenon that has been sharply increasing in use is the "Debit Card ".   That has all the attributes of a credit card, except that it simply transfers funds from the users own bank account to settle the debt.  In the latest banking review period the use of debit cards marginally exceeded credit card spending.   Last decade, the amount of credit card spending was more than double the figure expended on debit cards.

We are certainly seeing change in the logic of finance.  An ever increasing retail spectrum is moving away from a monthly billing cycle because of the cost of postage and many services are only available on the basis of automatic payment from the customers bank account.   The banks report that ATM patronage has fallen sharply as people need less cash in their wallets.  The ability to tap a debit card on a payment terminal - or to pay with a mobile phone - has changed the way we now pay for those small purchases that formerly required cash.

There is the expectation that this will continue to expand.  Unfortunately, it also makes us more vulnerable to complete chaos should we be subjected to a power blackout or the Internet be interrupted.  Past glitches have illustrated the complete cessation of all services.  It is logical that this would be a prime avenue of attack should a war situation develop.

It is a point to ponder before we completely do away with cash money !