Australian households whittled away $1.3 billion on their credit cards last year – and much of that was before they even purchased anything or paid interest. That figure is the amount Australians paid on credit card fees in 2010, according to the Reserve Bank of Australia (RBA).
As we suspect a large chunk of this hefty bill is from annual fees, what’s more surprising is that many cardholders could have avoided paying these fees,– given that a number of credit cards don’t charge an annual fee.
Damian Smith, chief executive of RateCity, urges cardholders to investigate the fees and charges on their cards and if unhappy, consider switching to another provider’s card.
“There are plenty of credit cards on the market that don’t charge an annual fee – RateCity has 31 without this fee – so if you pay off your card in full each month or don’t use it often there’s no reason why you should be paying an annual fee,” he says.
Annual fees up
In the past three years, credit card annual fees have increased by 18% on average, according to RateCity data. In 2008, the average fee (of those charging a fee) was around $79 and now it’s above $92 – an increase that has outpaced inflation by more than double in the same period.
More cards charge an annual fee today than in 2008, when around three-quarters of cards charged this fee, according to Smith.
“In fact 87 percent of all credit cards charge an ongoing fee. So it’s worth checking your credit card contract before signing up to another year,” he said.
Other fees down
While we’re paying more on credit card fees as a nation than in the past, Australian’s actually paid around $100 million less in total personal credit card fees last year than in 2009, says the RBA.
That’s largely due to the removal of certain ‘exception’ fees including those charged when a cardholder spends over their limit, for instance.
Steven Munchenberg, chief executive of Australian Bankers’ Association told the Herald Sun that households are paying less for banking even though they are using banking services more often.
“Customers are completing more transactions on more accounts, and are buying more products and services from banks. Also, customers are choosing lower-cost accounts.
“Banks have cut a range of fees on accounts and credit cards, so if you think you are paying too much for banking, call your bank and see if there’s a better product which suits the way you want to transact,” he told the Herald Sun.
Get the best deal
On top of the 31 cards monitored by RateCity with no annual fees, another 18 credit cards in the database waive their ongoing fee if a cardholder meets certain conditions, such as spending a minimum amount annually. On average, you’d need to spend around $12,000 each year to be eligible to have the fee waived, but minimum spend ranges from $1,000 upwards to $20,000.
“Incentives such as waiving the annual fee only works if you spend the specified amount each year so card holders need to be careful they aren’t lured by these types of deals if they don’t suit their needs,” says Smith.
Clearly, unhappy cardholders considering switching to another provider should do their research before signing on the dotted line. Compare credit cards by interest rate, fees and charges and conditions and always read the product disclosure statement so you understand your financial commitment.