Australia is considered to be one of the more enthusiastic credit card bearing nations in the world, with 152-million transactions being swiped every month, not to mention credit card expenses and accrued interest increasing on a monthly basis. Changes that came into play on 01 July 2012 have been welcomed by certain financial experts, as the nation has one of the highest interest rates in the world and is paying exorbitant fees to keep their plastic. The new reforms will put consumers in more control, and give them more information about paying off their debt. The news comes in light of 2011’s “plastic blow out” which saw credit card debt skyrocket to $50-billion, according to the Sydney Morning Herald—the highest record rate ever.
Consumers with credit cards can now look forward to a more transparent system, as statements are now to reflect not only how much credit a person has left but also how long it will take for the debt to be repaid. This change is in a bid to encourage consumers to pay more than merely the minimum amount owing and pay their debts off faster. Another of the important reforms is that over-the-limit fees will no longer apply and debts should be repaid quicker as payments will be allocated to the higher interest debts.
While the reforms will be applied to all new cards, some providers may be willing to apply the changes to existing cards as well. Analysts believe this is a good time for card owners and those thinking about getting one, to shop around and make informed comparisons about the fees they will be paying. It makes good sense for people to switch companies now, to take advantage of the reforms on offer and experts believe that the changes should give the market a shake-up.
There are currently 15-million active cards in Australia but the last 15 years has seen a 1000% increase in repayments on credit cards, increasing expenditure from $125-million to $1.3-billion. This has been attributed to the monopolisation of the market by the four major banks and very little competition, allowing credit card companies to set their own fees with very few consequences and even less competition. Analysts believe the reforms, which will introduce lower budget credit facilities, should make the market more competitive. As revealed by Bankwest.com.au (http://www.bankwest.com.au/personal/credit-cards/compare-credit-cards) credit cards are literally en route to becoming more affordable.
The online shopping boom may also have had something to do with soaring credit card debts, as consumers have warmed to the idea of e-commerce over the years with more Australians than ever taking to the internet to do their shopping online. One in 15 of them however, have found themselves to be the victim of credit card fraud and losses owing to credit card fraud have amounted to $278-million over the year alone, with a million cases being reported.
The reforms may also see the end of the ‘honeymoon’ period where banks offer very low or zero interest rates during the first few months of ownership, according to Steven Munchenberg, Australian Bankers’ Association Chief Executive, because higher interest debts need to be paid off first. Lenders are also required to be more transparent about their low interest periods and what it means for the credit card holder. While the reforms look to favour the consumer over the credit card provider, consumers should also expect further changes in interest structures as banks try to recover some of their funds in other areas.
Experts also believe that the Australian public may not be as aware of the reforms as they could be, as news from the housing market usually dominates financial news, and urges consumers to take the time to make comparisons about where they can get the best deals.