Senate inquiry calls for easier credit card switching and minimum repayments
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Version 0 of 1. The Turnbull government faces calls for credit card users to be able to switch providers more easily, and for minimum repayments to be set. Labor and Coalition senators agreed on the two changes to Australia’s credit card system in an inquiry report released on Wednesday, but differed on other possible changes. Eighty institutions offer more than 250 credit card products in Australia, with the four major banks accounting for about 70% of balances outstanding. At the end of the June quarter, Australians had $51.5bn in credit card debt, of which $33.1bn was accruing interest. While the cash rate has fallen to 2%, interest rates for standard credit cards are around 20%, with low-rate interest cards around 13%. Related: Credit card surcharges up to 23 times average 'will ultimately hurt businesses' The Senate inquiry found credit card providers had made cancelling a card difficult, with many customers opting to open a new account rather than go through the process of closing the old one. This meant that rather than have a new account with a lower interest rate and fees, or other benefits, they were left with a more complicated arrangement and greater financial risk. The report said the government should look at ways to enable easier switching, including account number portability for credit card accounts and a “click and close” online system. Coalition senators agreed with their Labor counterparts on the idea of setting a minimum repayment requirement and other ways to reduce the use of credit cards as long-term debt facilities. They pointed to the British model, which has more stringent checks and a minimum repayment formula under which repayments are calculated on the basis of interest, fees and 1% of the principal. However, any minimum repayment would need to ensure it did not hurt disadvantaged or vulnerable consumers or push them towards riskier borrowing such as payday lending. The report said credit card advertising and marketing material should clearly disclose the cost of a credit card, including the headline interest rate and annual fee. More work should be done in educating consumers about credit card use and costs, and providers should give more feedback to customers struggling with repayments about the suitability of their cards and alternatives, the report said. |