Some good news for all those feeling the burden of credit card debt: the Opposition Leader wrote to the Prime Minister last week suggesting terms of reference for a credit card inquiry by the Senate.
It proposes examining issues including;
- how credit card interest rates relate to the cash rate.
- the costs to banks of credit card loyalty programs (which are passed on to businesses and consumers through fees and charges).
- transaction costs including interchange fees (the fees which banks charge each other to process credit purchases). These fees are also the subject of meetings between the Reserve Bank of Australia and banking industry representatives.
- levels of competition in the credit card market.
The cross benchers seem to support the call for an inquiry and even the Treasurer says credit card interest rates are “too high”, and he would not try to stand in the way of a parliamentary inquiry.
The Australian Bankers’ Association has responded by pointing out that higher interest rates on credit cards reflected credit card lending being unsecured and therefore riskier and noted the “enormous choice” for consumers, with 193 credit cards being offered by 67 institutions. It is also true that higher rate cards come with a variety of features which we all love, but which have to be paid for, like; rewards programs, interest free periods, fraud protection, and travel insurance.
These political winds may blow relief in the direction of credit card users, but in the meantime, we suggest that you take charge.
Worried about online shopping?
Most credit cards offer protection against purchases made without your consent and have special clauses to include online purchases.
Many also offer additional pass or PIN code protections for online payments.
This is particularly valuable if you are purchasing from overseas sites.
What are your thoughts?
Do you think credit card rates are too high? Or are they justified by their convenience and the extra features they offer? Is there anything else you’d like to know about managing your credit card?
Join the conversation — leave a comment below and let us know what you’re thoughts are.