The Reserve Bank of Australia released significant statistics recently regarding the credit card market in the country. According to the March 2020 figures, Australia has an overall credit card debt amounting to $41.5 billion. Also, this sum comprises $26.9 billion as the amount that is gathering interest. With this scenario, it shows that Australian consumers are major credit card users. Considering the robust financial industry, these customers have higher chances of discovering better deals.
Central Bank Chief’s Advice to Australian Consumers
In May 2020, Philip Lowe spoke in a Senate probe, and he expressed the need for the Australian consumers to choose more competitive financial products. The Governor of the Reserve Bank of Australia affirmed that, in the national financial system, there are genuinely some consumer products that he described as quite well-priced. Lowe relayed, however, that most people do not avail of these financial offerings that deliver better value. He cited that this situation is problematic. Therefore, the head central banker encouraged the consumers to search for the most suitable products that offer more optimal value for their hard-earned money.
Wayne Byres shared the same perspective as the Governor of the Reserve Bank of Australia. He remarked that plenty of banking institutions in Australia that have high interest rates also have relatively affordable or low ones. The chairman of the Australian Prudential Regulation Authority relayed that he, too, finds it puzzling why consumers do not avail of these existing, favourable financial products. For Australia’s credit cardholders, it is, indeed, constructive to get the best deal when it comes to their credit cards. Therefore, shopping around is a recommended action.
3 Clear Signs That Tell It Is Best to Change One’s Credit Card Already
Australian consumers commonly switch the financial products they avail of now and then. These alterations can involve their banking and finance service providers and home loan refinancing arrangements. This year, some credit cardholders may also find it ideal to change their credit cards. They may find themselves experiencing the following situations, which indicate that it is about time to perform the modification.
1. The zero-per cent ‘honeymoon rate’ is nearly getting back to the high revert rate.
Consumers typically get offered by credit card providers with balance transfer or low-interest rate cards that have a zero-per cent, flashy ‘honeymoon’ or introductory rate. After a certain period, this enticing promotional offering, however, expires. Hence, when the ‘honeymoon rate’ comes to an end, the service providers will put the pricey revert rate into effect. This cost is typically the expensive interest rate that the credit card changes to after the conclusion of the introductory period.
2. The credit cardholder is not interested in the freebies and paying the expensive annual fee anymore.
First-time rewards credit cardholders may find the premium benefits of the financial product they availed of appealing. They may have enjoyed the freebies and other advantages that possessing the credit card offers. Examples of these perks are airport lounge access, points earning and redemptions, and complimentary travel insurance.
Nevertheless, as time passes, a consumer may find that downgrading his credit card is a worthwhile decision. It is because he may, later on, find paying the annual fee unworthy and impractical. Rewards credit cards usually come with a luxurious charge that customers have to settle yearly. Some of these points-earning cards’ yearly fees can balloon to an eye-watering $400, which may not be practical for some credit cardholders.
3. The consumer has opted for a minimalist and more practical financial life.
Bells and whistles typically characterise premium credit cards. These financial products may be enticing on the surface. Nevertheless, premium credit cards usually come with a high interest rate. They would lure their credit cardholders to spend often, too. This scenario is problematic because the credit cardholder would subsequently suffer from drained savings when his credit card bill comes. Knowledge of these real-life financial scenarios often leads consumers to modify their monetary values and spending habits.
These credit cardholders would tend to make their financial goals more focused and reasonable. Hence, they may decide to change their credit card if they find it unhelpful in reaching their new and practical financial objectives. If these credit cardholders desire to grow their emergency savings stash or save more money for a home loan deposit, then, they may opt to avail of a zero-annual fee credit card for their daily expenses and emergency cases.
Consumers who experience the three situations above may undoubtedly make the switch. They can perform their decision correctly by taking the following several factors to consider into account. These four elements act as a guide on how consumers can best select a suitable financial product for them.
4 Essential Factors to Consider When Switching Credit Cards
In early 2020, Michael Lawrence commented about Australia’s credit cardholders who review their existing credit cards regularly. As the Customer Owned Banking Association’s chief executive officer, Lawrence leads the sector advocate for Australia’s customer-owned banking industry, which includes building societies, credit unions, and mutual banks. He pointed out that the nation’s consumers who are aware or mindful of their bank cards are in a pleasant condition to search for a more competitive financial product. Here are some of the significant elements to consider when deciding to avail of another credit card and change one’s current product:
(1) Make sure to understand one’s credit card’s interest rate and those of his options.
When switching credit cards, consumers should be aware of their existing card’s interest rate. In this manner, they would know which alternative product offers a more favourable deal. As of June 2020, the average credit card interest rate in Australia is 16.88 per cent. The highest one is skyrocketing up to 24.99 per cent, while the lowest sits at 7.49 per cent.
(2) Be aware of one’s present and future requirements.
A credit cardholder can face an assortment of financial products properly by understanding his needs at present and in the future. This technique allows him to make an informed choice as to which credit card to select.
(3) Before formally beginning the switching process, assess one’s spending behaviour.
A consumer may ask oneself the following three critical questions:
A. When was the last time I evaluated my payments?
B. Has my shopping or spending behaviour got modified?
C. Have I got visibility of all expenses?
His answers to these three queries will help in determining the suitable financial product for himself.
(4) Take note of and weigh one’s options when it comes to the features of his credit card choices.
The interest rate is extremely significant to keep in mind when a consumer changes his credit card. However, besides this crucial factor, he should also evaluate the other features of his selections. These aspects usually consist of:
A. Balance transfer offers, like zero-per cent interest for a certain period;
B. Fees, which usually involve late-payment costs, annual fees, and foreign exchange margins;
C. Other benefits, like concierge, interest-free days, and purchase protection; and
D. Rewards programs, which typically involve bonus points offers, frequent flyers, and card provider rewards points.
Consumers have their reasons for deciding to change their credit cards. Some of them do not want the rewards perks they later found uninteresting to collect dust and be left unredeemed. Plus, they may feel uncertain and uninterested with their existing deals. Some credit cardholders keen on making the change may want to save more of their hard-earned money and to concentrate on achieving their new financial aims, too.
Therefore, rethinking one’s present credit card is a feasible activity. By shopping around on other offers, consumers will be able to select a low-interest rate credit card. They can relish the possibility of interest-free spending, too. Above all, by discovering the more suitable and practical credit card, consumers can live a life filled with financial wisdom or intelligence. In this manner, they can keep financial problems at bay and achieve long-term financial security.