THE FINANCIAL crisis has had “an astonishing impact” on the Irish credit card market, causing the level of spending on Irish cards to contract more sharply than in several other EU countries, new research shows.

According to a report prepared by UK consultant Peter Welch, the contraction in Irish credit card usage has been “dramatic”, particularly when compared to the trends in other European countries such as the UK.

“In the space of two years, the Irish credit card market has mutated from strong growth to sharp contraction,” the report says.

In the final quarter of 2008, spending on Irish cards fell by 10 per cent year-on-year, and this downward trend has accelerated in 2009. Credit card spending in the first quarter was almost 16 per cent lower than in the same quarter a year earlier, at €2.5 billion.

Although credit card spending grew at a rate of 4 per cent in both Ireland and the UK in the first quarter of 2008, the rate of decline in Britain has been much slower. For example, spending contracted by just over 2 per cent in the last quarter of 2008, and just under 3 per cent in the first quarter of 2009. “The contraction in spending on Irish credit cards has been over four times greater,” Mr Welch said.

However, although spending has declined rapidly, the number of personal credit cards in circulation has remained steady at approximately 2.2 million.

“There are no sign the Irish are using their credit cards for distress borrowing,” the report noted.

Mr Welch points out that there may be a “ray of hope” of a recovery in the credit card market.

Although spending on personal credit cards in June was 10 per cent lower year-on-year at €910 million, this was by far the highest monthly amount of expenditure so far this year.

It was also the first month where spending was higher than repayments, albeit only slightly. “There are clearly dangers in reading too much into the figures for one month,” Mr Welch said. “Nonetheless . . . any suggestion that the worst may be over must seem like good news.”