There are approximately 20 million debit cards and 40 million credit cards or charge cards on issue in Australia. Combined, we use them to make about 10 million transactions a day. Interest charges, late fees and other penalties cost Australians billions of dollars every year.
So it’s good news that changes to the National Consumer Credit Code will require card providers to be clearer about the cost of using credit cards.
The changes include:
- Credit card companies will not be able to offer customers credit limit increases or new credit offers without prior permission.
- Customers will have to specifically agree to their accounts being overdrawn. This will prevent card providers from charging automatic overdraw fees.
- Card companies will need to inform customers about the implications of making only minimum repayments.
Credit card statements will become easier to read:
- Charges associated with late payments or under-payment must be clearly spelled out.
- Statements must carry a ‘Minimum Repayment Warning’ that shows how much interest will be paid and the time it will take to pay off the balance if only the minimum payment is made.
- There must be an example of how much time and interest the customer will save if they increase their payment amount.
The changes are expected to come into effect later this year. Some estimates suggest that the reforms will save credit card users around $225 million annually.
Of course, the best way to avoid the costs and pitfalls of credit cards is to stop using them. With a proper budget in place you can start saving and eradicate your need for a credit card once and for all.
