Time to take action

Credit card customers must snap out of their apathy to stop throwing away hundreds, writes

UNSUSPECTING credit card customers are throwing away nearly $400 a year by failing to switch to deals with much cheaper interest rates.

Stubbornly high rates have continued to plague customers and apathy is getting in the way of consumers chasing down more competitive offers.

Reserve Bank of Australia (RBA) data shows cardholders have amassed $32.3 billion of debt that is accruing interest – an average of $4308 per person.

Analysis by financial comparison website RateCity has revealed that if Australians carrying this debt switched from a card charging the average rate of about 17 per cent to the lowest interest rate available of 7.99 per cent, they would save $388 a year in interest charges.

RateCity spokeswoman Sally Tindall urged customers to take action and hunt down more competitive rates.

“Customers so often focus on other features of a card such as rewards points and sign up to a card without even knowing what the interest rate is on balances owing,’’ she said.

“If you are someone who is not clearing your credit card every month then you should not be on a card that has an interest rate above 10 per cent. That’s handing money to your bank for free.”

Balance-transfer deals remain popular among customers who transfer debt THEY may already live in the sunshine state, but Queenslanders are the most likely to put their tax returns towards a holiday, new research has shown.

The annual Tax Refund Survey from homeloans.com.au looked at what 1097 respondents from across the five major states had in store for windfalls from the tax man and 23 per cent of Queenslanders said they would splash out on a holiday. That was ahead of Victoria with 20 per cent, 15 per cent in New South Wales and Western Australia and just 10 per cent in South Australia.

Overall, savings, investment and paying down mortgages were the most popular responses. The numbers reflected variances on living costs from state to state, according to Will Keall, homeloans.com.au head of marketing.

“Average house prices, mortgage repayments and costs of living vary,” Mr Keall said, explaining that housing costs were likely to be a barrier in bigger metro areas. “In Queensland, there are as many people living outside the city as inside.”

More people are saving their returns, potentially concerned about future interest rate rises.

“Nationally, there are 29 per cent saving, compared to 21 per cent two years ago,” Mr Keall said.

“The younger they are the more likely they are to save.”

Saving was the top priority for one in three respondents in from one card to another and enjoy a lower interest rate period.

To do this consumers should compare the deals available, apply for the new card that best suits them and include details of their existing card if they are moving debt across.

AMP financial planner Darren James said credit cards remained “easy money” for consumers and many didn’t bother New South Wales and Victoria, compared to just 25 per cent in Queensland. South Australians were investing or paying down debt, while Western Australians plan to reduce their mortgages and add value to their homes.

ATO statistics indicate three in four taxpayers are expecting a refund this year, at an average of $4000.

Social demographer Mark McCrindle said Australians are aware of financial headwinds.

“There is a real economic conservatism at the household level,” he said. “No one wants to run up more debt than they already have; we have higher levels of household debt than ever before.

“What do we do with a spare $4000? We save it, or we pay down debt. Australians are walking into debt with their eyes wide open.”

Sunshine Coast accountant Faye Heath is planning to use a portion of this year’s return for a family holiday to Cairns with husband Duane, sons Baden and Tyler and daughter Eden.

“Being an accountant is beneficial as you can prepare your return yourself and save money,” Mrs Heath said. “I always think about any upcoming bills. We have our rates due in August so we pay this with our refunds, then (plan) a holiday.”

Mrs Heath recommends doing an annual family budget without taking potential refunds into account.

“That way it is always bonus money and you can treat yourself.” FAMILY’S BEST FRIEND: Faye Heath is planning a holiday with her children Eden 9, twins Baden and Tyler, 12, and the family dog Molly. Picture:.LOU O'BRIEN. reviewing the deal they were on. “In an ideal situation you pay your credit card off at the end of the month, but even at low rates of 8 per cent, it is still double what people are paying on their home loan,’’ he said. “The charges are still fairly hefty and if you are not in control of that, it does bite.

“If your card is costing you a lot each year in interest, you have to weigh up the benefits.”