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Aussies flick credit for debit cards and save

Aussies flick credit for debit cards and save

May 5, 2011

More Australians are shopping smarter and using their transaction accounts for purchases rather than credit cards compared with this time last year, new figures have revealed.

The total number of debit transactions jumped 17 percent in the year to February 2011, while credit card use grew only 6 percent in the same period, according to Reserve Bank of Australia (RBA) data. Meanwhile credit card balances accruing interest dropped for the first time since November last year, signalling a shift in consumer appetite for plastic.

However, the figures also revealed that total credit card balances and credit limits are still at record highs with $49.3 billion of credit card debt in February, up 5 percent on February 2010.

Damian Smith, chief executive of RateCity, said an increase in debit transactions reflects both consumer caution and increased financial discipline. It may also reflect an explosion of online buying sites, particularly international sites, which may be driving consumers to debit cards.

“While it’s encouraging to see more sensible use of credit cards and greater use of debit cards, there is still a great deal of debt being built up on many credit cards across Australia,” he said.

Credit card costs outpace government benchmark
The real concern is the higher cost of credit cards, with the average personal credit card purchase rate (across almost 300 personal credit cards monitored by RateCity) increasing by 168 basis points over the past two years. That’s more than three times the increase of the RBA’s official cash rate, which has risen by 50 basis points.

“What this means is that a $4000 debt is costing you about $70 more per year in interest than it was two years ago,” he said.

But it’s not all bad news for consumers, which can save significant dollars by switching to more suitable credit cards and transaction accounts.

“Credit cards offer great flexibility for consumers,” Smith said. “But they must remember that owning a credit card is taking on the responsibility of a debt –  much like any type of loan but with more opportunity to ‘defer’ debt payments –  which can cause real problems down the track.

“For those that use credit cards often, it’s even more important to make sure the card’s interest rates and fees suit how you use it. If you don’t pay off your debt each month for instance, there’s no point paying high annual fees and rates for a rewards card.”

Transaction accounts also vary significantly between each financial institution in terms of how many transactions you make each month, the fees and charges, as well as features and services, so it pays to compare transaction accounts before you sign up.

RateCity monitors 80 personal transaction accounts that don’t charge a monthly service fee – that’s 60 percent of all accounts. Of those, more than half don’t charge a fee for direct debit.

So clearly, transaction accounts can be a much cheaper alternative to credit cards and if more consumers move towards debit transactions and switch their accounts to better deals, the greater the competition there will be between institutions.

Related transaction account links

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Learn more about bank accounts

Can British expats still open bank accounts?

As a British expat, you can open an Australian bank account, and you can apply for an account the same ways an Aussie would. You can even open an account online from the UK prior to relocating.

If you’re overseas, the bank you choose to open an account with may call you to provide you with our new account details beforehand. You can then have your ID verified within a branch once you’ve arrived.

And if you’re already living down under, the following list outlines the types of information required by most banks when opening an Australian bank account.

  • Australian residential address
  • Tax file number (TFN) or a TFN exemption
  • Identification (this can be your passport)

Can debt collectors take money out of your bank account?

Many people find themselves struggling to cope with debt at one time or another. In these cases, a debt collector could contact you to demand payment for a debt, to explain the consequences of you failing to pay a debt, or to organise alternative payment arrangements.

If you’re contacted by a debt collector, you may be wondering what their rights are and whether they can take money out of your bank account.

Creditors cannot access money in your bank account unless a court order (also known as a ‘garnishee order’) is made to allow creditors to recover debt by taking money from your bank account or salary.

If this happens, the creditor can take money out of your bank account unless you pay the debt in full or make an alternative payment arrangement such as paying in instalments through the court.

Do you need a bank account to get a credit card?

To get a credit card, you need to show proof of income, which will almost certainly require you to have a bank account.

Do you need a bank account to sell on eBay?

You don’t need a bank account to sell on eBay. But if you don’t have a bank account, you must provide either a credit card or debit card.

What do I need to open a company bank account?

To open a company bank account, you will probably have to provide 100 points of ID, an ABN and an ACN. You will probably have to provide the details of all signatories as well.

How do you open a bank account in Australia?

Opening a bank account in Australia is usually a straightforward process. Some banks give you the option of opening an account online, while others require you to visit a branch.

Different bank accounts offer different features, so it’s best to compare your options to find one that suits you.

All banks require you to pass an identity check to open a bank account. Australia uses the 100-point identification system, which means you’ll need to show a number of forms of ID that, together, add up to 100 points.

Common ID types include a driver’s licence, passport, Australian visa in a foreign passport, and Australian Medicare card. You’ll find out what types of ID are accepted when you go through the sign-up process online or at a branch.

Once your account is open, you’ll be given or sent a debit card that you can use to make purchases and withdraw money from your account.

What do you need to open bank accounts?

Opening a bank account is one of the simplest online tasks you could perform. The hard part is deciding which type of bank account you want to open.

All banking institutions have a website where you hit ‘apply’ on the account of your choice and step through an application in less than 10 minutes.

Here’s a list of information that is generally required for applications.

  • Identification (driver’s licence, passport, proof of age card, proof of citizenship and/or birth certificate)
  • Tax file number (so you don’t get charged the highest tax rate)
  • Address, contact email and phone number

If you decide to open a new account at the branch, make sure you ask beforehand what information you need to take with you, or take all of the above to be safe.

Which bank is best for business accounts?

Unfortunately, there’s no definitive answer to the question of which bank is best for business accounts. That’s because ‘best’ will differ from customer to customer, depending on their unique circumstances. These include not only your company’s financial position, but also its size, its age and the sector in which it operates. Another factor to consider is what features you want in a bank account. Your business may require different features than another business; and your business may require different features tomorrow than it does today.

The best thing to do is to thoroughly research the market before opening a business account. And when you do open an account, you should reassess your options every year or two, because the market moves quickly. A particular bank might offer the best account today, but be surpassed by one or several rivals tomorrow.

Can the government take your money from your bank account?

There are some instances when the government can take money from your bank account. This generally occurs in situations where you have an outstanding government debt.

Before it can take money from your bank account, the government authority owed money would first need to issue a garnishee notice. 

A garnishee notice is issued by the government agency (such as Centrelink or the ATO) to a third party that holds money for you or owes you money.

To take money from your bank account, your bank would be issued with the garnishee notice requiring it to pay ‘your money’ to the requesting agency to satisfy the debt.

Can you get a payday loan without a bank account?

Yes. Some payday lenders are willing to transfer loans to prepaid debit cards instead of bank accounts.

Can I set up a bank account online?

Most Australia-based lenders will allow you to set up a bank account online. Requirements vary from lender to lender, but you will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary ID.

How long does it take to open a bank account?

The length of time it takes to open a bank account varies, depending on whether you want to open it online or in person.

Online

Most banks and credit unions have simple online applications that usually take no more than 10 minutes to fill out. It can be especially fast if you have your identification documents like your driver’s licence and passport handy. Sometimes you will instantly be approved and the bank account opened. However, depending on the financial institution, it may take a day or so to be processed and your account number issued. Your account information and ATM or debit card will then be mailed to you, which usually takes between five to 10 days.

In person

If you decide to go into a branch or office to open a bank account, it may take about half an hour. Make sure you bring your identification documents with you. Also book an appointment if you can, otherwise you might be forced to wait in line. Sometimes your ATM or debit card will be issued on the spot, otherwise you’ll need to wait for one to arrive by mail, which usually takes between five to 10 days.

How do you delete your bank account from PayPal?

Deleting your bank account from PayPal is a simple three-step process:

  • Go to your Wallet
  • Choose the account you’d like to delete
  • Click ‘Remove bank account’

How can I check my bank account balance online?

Checking your bank account balance online is a simple process. Once you’ve logged in to your online banking, clock on the relevant account and the balance should be visible.