How spending less on petrol could stop you from getting a loan – and why you should always pay with cash and not card

Australians who buy petrol for as little as $20 instead of filling up their cars as they used to do, risk being refused a loan from a bank.

Credit checking company Experian translates tap-and-go transactions in real time for Australia’s major banks, so the online statement and banking app show where someone spent their money, instead of it just being a line of code.

With Australia in the grip of a cost-of-living crisis, Jordan Harris, head of innovation at Experian, said banks could interpret a $20 petrol purchase as a sign someone is under financial stress and cutting back.

“It’s less about the liter capacity of the tank, it’s more about behaviour,” he told Ny Breaking Australia.

“If a consumer used to just fill up with gas, that usually doesn’t seem like a round number: that’s $87.96 or maybe today that’s $150.96.”

With unleaded E10 now selling for $1.90 per liter, a petrol Toyota HiLux with an 80 liter tank would now cost $151 to fill up.

“If someone isn’t always filling up the tank – and that looks like on non-round number transactions – and he or she moves to smaller, non-round number transactions, that can sometimes be a sign that that consumer is starting to budget a little more. be tight and a little bit more deliberate in the way they spend their money,” Mr Harris said.

“That can be an indication in many cases that they’re starting to feel a little bit of financial stress or a little bit of pressure.”

Cash offers privacy

But Mr Harris, who previously specialized in risk management at ANZ, admitted using cash to pay for everyday goods such as petrol would prevent banks from getting a more detailed picture of your spending habits.

“If someone pays in cash, there is obviously no transaction that we can enrich and give extra meaning,” he said.

‘If someone takes money out of the ATM and just spends it, there is obviously not much insight. There are actually no transactions that the bank can see other than cash withdrawals.’

A new Reserve Bank report released Monday shows that 73 percent of transactions for purchases of $10 or less are now made with a card.

Cash purchases made up just 16 percent of in-person transactions in 2022, half the 2019 level, and just five percent of consumers made all their personal purchases with notes and coins.

Mr Harris said banks would be less likely to issue warnings if a customer withdraws large amounts from an ATM.

“Not that I know of, no,” he said.

Get a loan, a telephone subscription

While behavioral changes may indicate that a bank should provide someone with support, it can also be used to make a lender reconsider whether to approve a loan for someone.

“Possibly the banks could choose to use it that way,” Mr Harris said.

“They will use that information to decide whether to approve or deny a loan.”

Companies like Telstra and Optus can also contact Experian to ask if a customer wanting a phone contract is reliable.

“They can contact our credit bureau to access the credit reporting data we hold on that individual, and that could include things like outstanding loans, credit inquiries, defaults,” Mr Harris said.

Credit cards

Credit monitoring companies such as Experian and its competitors Ilion and Equifax also provide banks and phone companies with consumers’ credit card limits and whether they have missed repayments.

“If someone goes over their credit card limit, that’s something that banks have traditionally used as a sign of stress,” Harris said.

“We’ll have a limit on the amount they owe — in the credit card example, the limit is $10,000 and we might know the account is up to date, or we might know the account is two payments behind.

“But we won’t know what the balance is on that card – a thousand dollars or $8,000 – we just know the limit of ten and the refund status.”

Buy now, pay later

Those who use buy now, pay later apps like Afterpay can also trick a bank into thinking someone is struggling to pay their bills.

“It’s not the fact that consumers buy now and pay later – that’s a fairly widespread and normal practice,” Mr Harris said.

“So if you’re suddenly using Buy Now, Pay Later services extensively – you know, seven, eight, nine, 10 transactions a month – and previously maybe only used them a few times a month, that doesn’t mean you is necessarily doing something wrong, but it could be an indication that you’re starting to experience some financial stress.”

Signs of stress

Experian also revealed that two-thirds of credit managers surveyed had already seen an increased risk of consumer defaults and hardship in the past six months.

Borrowers who have taken out a loan since 2019 are also three times more likely to default than someone who took out a mortgage in 2015.

Mr Harris said questionnaire of 75 financial risk leaders in Australia showed that ‘navigating the current economic environment is not easy’.

The Reserve Bank of Australia this month raised interest rates for the thirteenth time in eighteen months, bringing the cash rate to a twelve-year high of 4.35 percent.

Variable mortgage rates have risen by 69 percent since May 2022, when the cash rate was still at a record low of 0.1 percent.

The Experian study found that mortgages approved at the end of 2022 were almost five times more likely to default than mortgages started in early 2021.

Australian Bureau of Statistics data released on Tuesday shows retail sales fell 0.2 per cent in October, while sales for clothing and footwear fell 1 per cent.

Retail’s annual growth rate of 1.2 per cent was the weakest since August 2021, when Sydney and Melbourne were in lockdown.

ANZ economists Madeline Dunk and Adelaide Timbrell said retail sales fell even as more than 400,000 foreign migrants moved to Australia in the year to September.

“This despite high inflation and high population growth,” they said.