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Credit card madness

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Has the world gone mad? No, I’m not talking about the troubles in the Middle East and elsewhere around the globe.

While these events are to be expected in a world where globalisation and the internet is turning conventions on their head, at the same time I cannot work out why Australians are prepared to pay 20 per cent for a credit card. These people must be crazy or millionaires!

Better financial literacy needed

The fact that anyone would pay 20 per cent on a credit card underlines one of this country’s greatest educational disgraces, and that is our financial literacy is embarrassing. That’s despite the Federal Government having a program to fix up this problem, but has anyone ever seen any publicity about it?

Of course, I have heard about it as I work in the industry but the attempts to capture the attention of mainstream Australia by the group in Canberra has been nothing short of terrible. And if the responsible people say they’re working in the schools, then I say that’s a good idea as we know how much kids love to listen in school — especially when it’s on a subject involving better banking. 

Rising rates

According to, since Christmas when a lot of Aussies let good sense go with their credit cards while spirited with Christmas cheer, more than 50 credit cards have now gone over 20 per cent. Only a year ago, there were less than five cards in the 20 per cent plus stratosphere.

Some of the most well-known cards from the most used banks fall into this category and it means someone meeting the minimum repayment on a $3000 balance could take 10 years paying $4880 in interest and fees to clear the debt! 

Look around

Now Mozo shows that by switching to say the ANZ Low Rate card they could save $3882 and cut the debt-repayment time in half.

With a card like this it has a 2.9 per cent charge on any balance transfer for 18 months and then the ongoing is rate is 13.49 per cent, which is really low compared to 20 per cent or more.

At, they have pointed out that Bankwest has a low introduction rate of 5.99 per cent on balance transfers and purchases for 12 months. Meanwhile, Aussie Home Loans has a card which has the following features:

  • Just 2.99 per cent per annum on balance transfers for the first 12 months but this is a limited offer!
  • 9.99 per cent per annum on purchases for the first 12 months.
  • Reverts to an ongoing rate around, currently 13.29 per cent per annum on purchases.
  • Up to 55 days interest free credit on purchases.
  • An annual fee of $49. 
Do the maths

This could be used as a benchmark for better or worse options so you can eventually find the card that suits you but it shouldn’t be a 20 per cent plus credit card.

By the way, these annual fees should be considered when you make your decision as they do add to the overall real interest rate you will pay on your card. Clearly, the more you spend, the less real impact it has on your average cost of running a card.

While you’re objectively assessing your card and looking for a better one, have a look at the days ‘interest free’ and become an expert on paying off your card before interest cuts in.

Get changing

My goal in writing this story is to shake Aussies out of their complacency or their ‘it’s all too hard’ attitude. It’s not too hard if you think saving money and making yourself richer is more important than making banks more profitable.

On my Grow Your Business program on Sky News Business Channel each weekend, I conclude my show with my favourite self-improvement cliché or advice: “If nothing changes, nothing changes!”

It’s time for change for many poor money-managing Aussies and if change comes, there will be more than spare change in your pockets and purses. I promise. 

NOTE: Figures correct as of February 2011.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, April 15, 2011

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