How can you save the most from these changes?
Australia’s banking and financial sector has been subject to a series of reforms many people may not understand. Perhaps the one with the greatest impact is the reforms to credit cards which may help you save money.
New credit card reforms coming in to play on 1 July 2012 could save Australians over $2.4billion in charges. So how can you save the most from these changes?
1. Pay your higher interest balances first
Currently your credit card repayments are allocated to the part of your balance the banks earn the least interest from. Under this reform, your repayments will now be allocated to the part of your balance which accrues the highest interest, enabling you to reduce your balance quicker than ever before. However, this only applies to new cards taken out after 1 July 2012 so now is a good time to consider switching cards, and perhaps locking in a lower interest rate.
2. Refuse over-limit fees
According to the Reserve Bank, in 2011 financial institutions made $487 million in exception fees which includes over-limit fees on credit cards. The new reforms will mean that over-limit fees will be banned unless you specifically agree that your lender can charge you a fee for the service. You should contact your card provider to check the specific terms of your agreement and consider switching cards to another provider.
3. Read your personalised monthly statements
Paying the minimum to your credit card balance each month can mean you get stuck in a rut, never clearing the amount you owe. A typical balance of $5000, at an interest rate of 20 per cent, would take over 45 years to pay off if the minimum payment was all that was made each month and $19,000 would be paid in interest. From 1 July 2012, credit card statements will now detail how long it will take you to pay off your balance if you only pay the minimum repayment.
Jeremy Cabral, Publisher of CreditCardFinder.com.au says, “Now consumers will know how much it’s costing them to repay their credit card debt, and the message is simple: Fight the Debt. Compare the cards on the market and bag yourself the best deal on July 1st in order to save money before the banks start modifying their offers.”
So now is the time to review your credit card and find out if switching providers can save you money. For more information on how to switch and to find the best offers available, visit www.finder.com.au.