Many Australians have a love-hate relationship with their credit cards. They provide unrivalled convenience, allowing you to quickly and easily move your money where you need it. The problem is, we are often handed a card without knowing how to manage our debt or even when fees will be applied.
That's why the federal government introduced a credit card reform, which is having a positive effect on transparency in the Australian credit card market.
What does the credit card reform mean to me?
The credit card reform is part of the government's Competitive and Sustainable Banking System package and includes:
- Repayments apply to debts with the highest interest rate first
- Unsolicited offers for credit limit increases are banned unless you give your permission.
- There are no fees for going over credit limits unless you accept the option. You will be notified if you go over your limit so you can decide what to do.
- Your monthly statement is more personalised and details how long it would take you to pay off your debt if you only paid the minimum repayment.
- Interest is charged consistently at the industry-agreed standards.
- Consumers have more say over their own credit limits.
- Credit card key fact sheets must be provided in a standardised layout so lenders have and understand all the information.
The tougher rules for credit card providers are likely to help you better understand your financial obligations for your credit cards.
The banks and other lenders appear to be opposed to the credit card reform, especially to the proposed rules about offering higher credit limits and paying down debts with the highest interest first.
Even if this credit card reform doesn’t revolutionise the credit card market, they must - even only very slightly - reduce profits on plastic for the banks.
No matter the outcome it's a good reminder to always read your Product Disclosure Statement for your credit card and be aware of what you're paying for.
If you are on the hunt for a new credit card use the Ratecity credit card comparison tool to track down some of Australia's best.