Plastic waste: Why I’m cancelling my credit card
I’ve got 11 days to close my credit card account. The reminder is on a Post-It note, above the one place I’m guaranteed to look each morning: the coffee machine.
If I’m honest, I’m 355 days late on this task. I had planned to cancel my card before last year’s annual fee was due, but life got in the way and before I knew it, the $300 fee was a line item on my statement.
Not this time around. Playing the credit card points game is not for the faint-hearted. Remember, these companies are not charities. Last financial year, the banks raked in more than $1.4 billion in credit card fees, a figure that has risen by 28 per cent in just one year.
Yes, you can potentially get ahead, but only if you stay hyper-vigilant and have a passion for reading fine print. It’s also important to do a yearly health check on your card to make sure the costs aren’t outweighing the benefits.
To calculate this, your annual fee is the obvious place to start, along with any interest you’ve been charged, but don’t forget incidentals such as currency conversion fees and credit card surcharges.
Assessing the value of your rewards is where people often get starry-eyed. Insurance you’ve never used, points you’re collecting for a dream holiday, shouldn’t go in the equation, because who knows what value they’ll hold when you do finally use them. It needs to be things you’ve actually redeemed within the year.
Over the last six months, we’ve seen a flurry of big bank credit card changes, from rate and fee hikes, to cuts in interest-free days, making it even more important to give your card a once-over.
Most recently, NAB stopped handing out rewards points on BPAY transactions, a perk some customers probably didn’t even know existed, yet others were furiously mining.
This leaves ANZ as the only major card provider to offer rewards points on BPAY transactions, but here’s where the importance of reading the fine print really kicks in. Yes, you can accrue points, but only if the biller accepts credit card payments via BPAY. If they don’t, ANZ will still process the transaction, but treat it as a cash advance, which attracts a 3 per cent fee (capped at $20), and an annual interest rate as high as 21.99 per cent, charged from day one. Ouch.
The biggest trap credit card customers fall into is still the debt treadmill. Collectively we have $17.6bn worth of debt attracting interest at an eyewatering average rate of 18.34 per cent. It’s a mighty fine equation, for the banks that is.
If you are on this treadmill, it’s time to get off, no matter how shiny your credit card points program is. A personal loan can potentially be a good exit strategy here. While it doesn’t offer you the perks of the plastic, it will at least give you an end date for paying off your debt in full – something credit card companies never ask you to do.