Our banks can do better than this: ASIC report highlights the need for greater credit card reform


Georgie Hay
Jul 4, 2018( 3 min read )

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ASIC’s proposed credit card reforms are another step towards better regulation around credit cards but more work is needed for Australians to step off the credit card debt treadmill.

Today’s announcement that lenders will be required to assess whether the customer can afford to repay the credit limit within three years is an important step.

RateCity data shows some providers currently offer credit cards to people with incomes less than $15,000.

Consumer advocate RateCity.com.au believes the reforms can go further including:

  • Mandatory minimum repayments of at least 5 per cent.
  • A low rate credit card option from every lender.
  • Greater education around the pitfalls of balance transfers, including the loss of interest free days; the impact of not paying off your balance within the interest free period; and the benefit of closing your old card when you transfer.

RateCity spokesperson Sally Tindall said the reforms needed more ‘stick’ if they want to reduce Australia’s overall debt.

“People need to be forced to pay down their debt and minimum repayments are essential part of this.

“RateCity data shows that 54 per cent of lenders ask customers to pay just two per cent of their credit card debt every month, while the highest minimum repayment is just five per cent, offered by three providers.

“That’s simply not enough.

“We would like to see the majority of lenders increase their minimum repayments to 10 per cent, with a government-mandated minimum of five per cent,” she said.

Today’s report from ASIC highlights just how many customers fall into the pitfalls a balance transfer can bring, with 31.6 per cent of people ending up in more debt.

“One of the main reasons people come off second best after taking out a balance transfer is that they don’t realise they lose their interest free days for new purchases, which means they get hit with interest as soon as they hit the shops. 

“We would also like to see all lenders offer a low rate credit card option for their customers.

“Many customers get blindsided by the bells of whistles of rewards cards when in many cases they would be financially better off with no-frills, low rate card.

“RateCity data shows that just 4 per cent of all cards on the market offer an interest rate of under 10 per cent.

“Our banks can do better than this,” she said.

Lowest rate credit cards on RateCity.com.au database

Company

Card

Rate

Annual fee

Interest free days (up to)

American Express

Low rate

8.99%

$0

55

Community First Credit Union

Low rate visa / McGrath Pink Visa

8.99%

$40

55

Easy Street Credit Union

Easy Low Rate Visa credit card

8.99%

$40

55

Bank Australia

Low Rate Visa Credit Card

9.39%

$59

0

G&C Mutual Bank

Low Rate Visa Credit Card

9.49%

$50

50

 

Big 4 lowest rate cards

Company

Card

Rate

Annual fee

Interest free days (up to)

CBA

Essentials credit card

9.90%

up to $60 pa

55

Westpac

Lite Card

9.90%

$108

45

ANZ

ANZ Low Rate

12.49%

$58

55

NAB

Low rate card

13.99%

$59

55

 Source: RateCity.com.au

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