Plastic not so fantastic
Tough credit card changes set to kick in
CREDIT-HUNGRY Australians will find it harder to get new cards to manage their Christmas debts this year, under changes designed to clamp down on unruly lending.
Customers signing up to new deals must prove they can pay back a card’s full balance within three years, which could result in much lower credit limits. However, they do not have to pay it back in that time, and in most cases can still pay the minimum 2 per cent.
Among new regulations that took effect on January 1, card issuers cannot contact customers to offer credit limit rises and must give them the chance to reduce credit limits online.
Financial comparison website RateCity spokeswoman Sally Tindall said the card limit restrictions would help prevent customers from running into debt, but would make it tougher to get a card.
“These new rules will come as a shock to some people who were banking on using a new balance-transfer card to give themselves time to pay off their Christmas debt,” she said.
“A lot of people will find they’re offered much lower credit limits than they’re used to and in some cases rejected outright by the lender.”
Balance-transfer cards allow customers to shift debt from one card with a higher interest rate to a card with a honeymoon no-interest rate period for up to 24 months.
But Finance Brokers Association of Australia managing director Peter White said RateCity spokeswoman Sally Tindall speaks on changes to credit card regulations coming in this year. the new “serviceability calculations” were not enforceable and lenders were not required to ensure a customer paid back the debt in the three-year period once they acquired the card.
He feared the rules would put a “handbrake” on retail spending. “People won’t have credit card limits they might have had in the past,” Mr White said. “It tarnishes everybody with the same brush; you are restricting access to credit because of the bad behaviours of a few.”
Latest Reserve Bank of Australia figures show Australians owed $51.5 billion on plastic and $31.7 billion was accruing interest.
Data shows in the 2017-18 financial year Australians spent $1.5 billion on credit card fees. Between 2012 and 2017 about 62 per cent of consumers had only one credit card.