Warning signs for discretionary retailers as more consumers rely on credit cards, new research finds

Australian households are increasingly leaning on credit cards to cover everyday expenses between paydays, with new research warning the trend poses a direct threat to discretionary retailers already bracing for a sharp slowdown in consumer spending.

Research from Money.com.au, based on a survey of more than 1,000 Australians conducted in June, found 40 per cent of respondents have become more reliant on credit cards to cover basic expenses like groceries over the past 12 months.

Almost a third say they depend on credit cards for everyday spending for at least six months of the year, while 54 per cent of Millennials report increased credit reliance - the highest rate of any generation.

The findings land alongside Reserve Bank of Australia data released earlier this month showing credit card debt accruing interest rose $61 million in May to $19.4 billion, while credit card spending hit $29.9 billion - up $1.1 billion month-on-month.

Combined card transactions reached $89.5 billion, the second-highest level on record.

Sean Callery, the head of insights at Money.com.au, says the growing reliance on credit to fund basic purchases is a warning sign for the broader retail sector.

"If people are relying on credit to cover essentials like groceries and fuel, discretionary retail is typically the first place that pressure shows up,” he says.

“Once a shopper's credit capacity is being absorbed by everyday costs, there's less room left for anything beyond the essentials, and that has real implications for retailers relying on discretionary spending to drive growth over the next 12 months."

Callery points out that younger Australians are driving the sharpest rise in credit reliance.

“They're also core spending demographics for a lot of retail categories,” he says.

“Retailers courting younger shoppers should be paying attention to the fact that a growing share of that spending power is coming from credit, not income, which affects both how much they can spend and how sustainably they can keep spending it."

The research found more than half of Millennials (54 per cent) say they've become more reliant on credit cards to cover basic expenses between pay cycles over the past 12 months, followed by 46 per cent of Gen Z.

By comparison, only 39 per cent of Gen X and 30 per cent of Baby Boomers said the same. However, Gen X are the most likely to regularly rely on credit cards to bridge the gap between pay cycles.

Nearly one in three Gen X Australians, or 32 per cent, say they use a credit card to cover everyday expenses for at least six months of the year, compared to 30 per cent of Millennials and Gen Z, and 28 per cent of Baby Boomers.

The Money.com.au data backs up forecasts from Deloitte Access Economics earlier this year of an expected slowdown in discretionary spending growth from 2.5 per cent in calendar 2025 to just 0.7 per cent in the year to December 2026.

Overall retail turnover growth is forecast to moderate to 1.8 per cent in 2026, down from 2.3 per cent in 2025.