Why are we blind to credit-card tricks? 45



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For more than 40 years, credit-card companies have been cashing in on Australia’s desire to have what they want, when they want it. But soon the extended honeymoon could be over, with several reforms on the table that hope to reign in our enormous credit card debt.

Australia currently owes $51.46 billion on credit cards with $33.1 billion of that in accruing interest – this is the worst level of debt we’ve seen since reporting on our use of credit cards began in the 80s, according to News Corp.

A senate inquiry into credit-card interest rates has unearthed numerous practices that are designed to milk more money out of each of us.

The inquiry is looking into banks’ and other lenders’ credit card interest rates and fees – card rates have been rising despite the official RBA cash rate falling to a record low.

Along the way, other tactics are being explored, even finance commentator David Koch has weighed in, saying the practice of offering unsolicited credit increases must be banned.

“There should be no unsolicited credit cards or credit card limit increases … by stopping this a customer makes a decision,’’ said Kochie.

Another tactic used by lenders is the “zero per cent balance transfer deals”, which the ANZ admits 30 per cent of customers end up failing to clear their balance and paying a higher interest rate, thus ending up worse off.

Kat Lane, from the Financial Rights Legal Centre, which helps many people struggling with credit-card debt says clients are typically paying interest rates of as much as 30 per cent.

Mr Lane says lenders “have Jedi mind-tricked us into thinking credit-card debt is long-term,” and that their interest rates are uncompetitive. The senate has heard that it takes some people decades to pay off their credit card debts.

While it’s easy to throw stones at the credit-card industry, we have to take some responsibility – a survey by ME (formerly ME Bank), reported in The New Daily showed our shocking lack of savvy when it comes to these all-too-easy sources of credit.

The survey found that the vast majority of Australians are settling for interest rates as high as 20 per cent and that a whopping 73 per cent of consumers said they didn’t know the interest rate on their own credit card, while 40 per cent didn’t know whether or not they were paying an annual fee.

Who is to blame for Australia’s credit card crisis? The lenders – or the borrowers? 

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  2. I don’t have a credit card. The interest is astronomical. It is better to layby if you can’t get it straight away or put away a bit each week till you can. It costs a fortune if you can’t pay your whole balance every month. I have heard people, including my own kids say, “but it’s only $40 a month, or whatever, but when you add the interest you are paying more than its worth in the long run and all those “little” $40 bills add up and make life difficult

  3. I do use a credit card but always pay it in full each month so they never make a cent out of me in interest, but this month’s bill has a $95 annual fee, they will gouge you somehow.

    1 REPLY
    • Wendy check out Go Master Card (owned by GE Money). Doesn’t have a yearly fee. Yes, their interest rate is high I don’t incur this as I clear the balance every month. If you take advantage of their 55 interest free days the charge is $4.95 if the balance is over $10 at end of month. I pay ours off in full the day before the end date of the statement is due. Hence don’t even pay the $4.95 monthly accounting fee. Also it has a rewards program for every dollar spent on the card. I use our rewards for gift vouchers then go to the shop I have requested the gift voucher for. Last year I had over $400 in gift cards. I pay every thing on the credit card plus food. Been doing this for the last 11 years and never paid any interest.

  4. On the credit card statement it does inform you of how long it will take to pay off if you only pay the minimum amount. It also tells you how much interest you will pay. The information is all there, people just have to read it. I use my card to pay all my monthly expenses. My husband (an accountant) then does our monthly books. At the end of the financial year we can review our yearly expenses in relation to last years. It is very helpful to know where your money has gone. If used correctly they can be very good.

    1 REPLY
    • I agree not enough people read the conditions etc. my hubby pays card off each fortnight and we both budget so as not to over spend, love the convenience of using a card.

  5. Got rid of mine years ago, best thing I ever did. My debit card (using my own money ) gives me the same convenience with no costs.

  6. No only a debt card. No money no shopping, no debt. Can not afford do not buy it simple

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