Australia's credit card debt accruing interest is staggering $18 billion

[Gremlin]

This isn't possible. No Australian CC provider allows you to use a CC to pay off another CC - there are banking regulations that prevent this.

This is just plain wrong. If someone holds multiple CC and takes a 'cash advance' on one, no one ever asks if they're using it to pay the min balance on another CC.

Furthermore, the whole 'balance transfer' concept is precisely about using a CC to pay off another CC.

 

[Lynda2475]

If someone holds multiple CC and takes a 'cash advance' on one, no one ever asks if they're using it to pay the min balance on another CC.

But that isn't what was said, you absolutely can't use one CC to pay another.

Cash advances are just another poor decision as interest on cash advances accrues immediately (not after interest free period), again this is explained in the PDS/T&Cs.

Furthermore, the whole 'balance transfer' concept is precisely about using a CC to pay off another CC.

Well interest is 0% on the transfer amount usually for 6 months, so as I stated earlier if you choose this (no one forces you) a responsible person would concentrate on paying down that balance not accruing even more debt.

None of these complaints explain why the people who use credit responsibly are in anyway responsible for those who don't.

By all means lobby your local politicians or the banks to ban credit cards if that is your want but aportioning blame for the poor decisions of some credit users to other responsible credit users is imo nonsensical.

 

[lorikeet1326]

Low income earners don't qualify for a black card with 22% rate.

Just witnessed someone on $26k p.a. causal income approved for rewards card with >20% interest rate and $6k credit limit, clearly banks do not care.

 

[CaptJCool]

I note in the original article

39 million debit cards nearly 40 million
13 million credit cards

Why do Australians take out a credit card?

What are the top reasons you got your most recent credit card? For

emergencies – 41% Rewards/frequent flyer points – 38% Make a big purchase – 21% Establish my credit – 18% Pay off debt/do a balance transfer – 11% Manage a drop in income – 8%

So to a fair degree people are kept out of the credit card cycle because of bad credit ratings etc

Unfortunately emergencies do happen - the big screen TV is essential for the grand final viewing when my team makes it ! It’s an “emergency”

People who cut the cloth, earn before they spend or understand their Coca Cola income doesn’t match their champagne tastes will do perfectly fine

 

[Lynda2475]

earn before they spend or understand their Coca Cola income doesn’t match their champagne tastes will do perfectly fine

Exactly and those who failed to learn that very simple lesson have to own their poor decisions.

 

[elanshin]

Just witnessed someone on $26k p.a. causal income approved for rewards card with >20% interest rate and $6k credit limit, clearly banks do not care.

That is most definitely not a black card. Black cards attact high annual fees and much bigger limits.

Also almost every CC has at least 20% interest after interest free period.

Honestly the income has no bearing on how financially responsible someone is, it just means how much risk the bank is willing to give you.

CC by default is not an evil trap tool. It's a form of debt instrument. When used correctly it can have great benefits, when used irresponsibly, it can cause huge problems.

Ive often maxed CCs to use as cashflow for business that I know I can pay off. Why? Because it gives me interest free days on the payment which i then plonk the cash into an interest earning account. I'm now effectively saving a few % on my CC limit by earning interest as well as racking up points.

A lot of people need financial education even at a basic level as it's not taught in any of our education. I spent nearly half a day explaining to my SO when i found out how little financial knowledge she had going over the basics of CC, high interest saving accounts, term deposits etc.

 

[Lynda2475]

as it's not taught in any of our education.

I dispute this, it comes down to the subjects you choose to study (although simple and compound interest are covered in maths class for all).

I distinctly remember learning about credit cards and mortgages in Commerce (Grades 8-10) and an assignment on how to do a tax return using the old tax pack. Also there a lot of coverage of interest rates and monetary and fiscal policy in Economics in grades 11-12.

My economics teacher instilled in us "never borrow money for anything except property, never take out a owner occupier mortgage with less than 20% deposit as mortgage insurance protects the bank not you" and "you cant afford a credit card if you cant afford to pay it off in full every month".

My sister did Business Studies in grades 11-12 and also learnt about credit products and how they work.

Of course if you choose to do history or art instead then perhaps you didnt learn this but NSW schools at least definitely do have coverage in the curriculum.

And of course i was raised to save for what you want. My mum used to buy toys/clothes for our Christmas/Birthday presents months in advance when they were on sales via lay-by where Kmart (or myer or whomever) held the goods whilst you paid it off in installments, interest free but a one off payment of $2.50 for setting up the lay-by.

Too many want instant gratification above their station these days.

 

[Gremlin]

But that isn't what was said, you absolutely can't use one CC to pay another.

Cash advances are just another poor decision as interest on cash advances accrues immediately (not after interest free period), again this is explained in the PDS/T&Cs.


Well interest is 0% on the transfer amount usually for 6 months, so as I stated earlier if you choose this (no one forces you) a responsible person would concentrate on paying down that balance not accruing even more debt.

None of these complaints explain why the people who use credit responsibly are in anyway responsible for those who don't.

By all means lobby your local politicians or the banks to ban credit cards if that is your want but aportioning blame for the poor decisions of some credit users to other responsible credit users is imo nonsensical.

Are you suggesting that if someone takes a cash advance from one credit card and uses it to pay the minimum on a different credit card, that's not using one card to pay another? I had a cousin who did this religiously. It was initially someone from (one of) her banks that suggested she do this when she rang to negotiate her payment - I suspect because they then got their payment and the problem became the other provider's. But it started a whole new merry-go-round. It took five years to unwind the financial damage she did to herself in her early twenties.

Are you suggesting that a balance transfer, which is quite literally opening another credit card to pay an existing credit card balance, is not using one card to pay another?

I actually think it would be a very good thing if it wasn't possible to use a credit card to pay another credit card. But, despite your assertion, there are definitely ways of doing so. My cousin found several of them.

 

[Lynda2475]

No what I am asserting is that when you receive the bill for your Amex card you cant use your Visa card to pay it directly. If you could many of us would do this to generate even more points. Noting until the early 1980s you could directly pay one credit card with another, but then regulation came in to prevent it.

Cash advances are not directly using one credit card to pay off another; its using credit funded cash so is indirect and extremely stupid. Unless the government bans cash advances on credit cards (which I am perfectly fine for them to do) then there is no way to know when an individual gets a cash advance what they will use or misuse it for.

There are always people who will look for and exploit loop holes even if it is to their own detriment, but again those of us who use credit responsibly have zero role/accountability in their poor decisions.

Also, if indeed a bank employee provided such poor advice to use a cash advance to pay off a CC debt, I would be requesting the audio recording as that goes against both the banks policies and government guidance.

Some people misuse legal products including credit, alcohol, over the counter drugs but it is nonsensical to blame those who use those same products responsibly for the behaviour of those that dont.

 

[elanshin]

I dispute this, it comes down to the subjects you choose to study (although simple and compound interest are covered in maths class for all).

I distinctly remember learning about credit cards and mortgages in Commerce (Grades 8-10) and an assignment on how to do a tax return using the old tax pack. Also there a lot of coverage of interes rates and monetary and fiscal policy in Economics in grades 11-12.

I should probably rephrase this as compulsory education as well as more in-depth practical applications of finance and financial products.

History and geography are mandatory subjects and form the foundational basis of what we know about Australia, its history and location. I'd argue that "finance" should be a country wide mandatory subject not an optional. Every kid should know the basics of our financial adulting world.

Interest of course is indeed taught, but as often is the case with maths, people struggle to see the obvious practical use case even if its in their face.

Ironically, its funny thing that the year 11-12 economics (and even uni level) are actually not helpful in the real world. Textbook economics often don't apply in real world situations, only utopia and rational situations. The amount of times where "value" theoretical economics and investment in either stocks or currency gets absolutely destroyed by technical and market manipulation, fomo and psychological reasons is usually a hard lesson most economics and finance students learn moving into real world markets from theoretical at some stage soon after entering the work force.

 

[Lynda2475]

History and geography are mandatory subjects

No they arent, or at least they weren't when I went to high school.

Except for the usual Capitan Cook, early explorer and Aboriginal basics taught in primary school, and some Egyptian/Mesopotamian history as part of a social studies class in grade 7, I never had to actually study history nor geography in high school

I do agree that it makes sense to be taught financial literacy as part of the curriculum, but that is very crowded these days with government imposing a mandatory second language, environmental studies, PE etc.

A rethink is probably due.

But parents also have a huge role to play.

 

[JohnK]

This isn't possible. No Australian CC provider allows you to use a CC to pay off another CC - there are banking regulations that prevent this.

As I said if you've never been involved you will never know nor will you understand but it's a very simple concept.

Maxxed out card charges $340 interest and minimum repayment is $520. Pay $520 and withdraw $180 from ATM or transfer to pay anyone with fees of anywhere from $4-$6 fee.

Use some of your money + the above withdrawn funds and pay next credit card and withdraw available funds again with more fees. Rinse and repeat.

I won't answer the rest of your post because it's lecturing people who are already in trouble. No point saying I told you so. Doesn't help someone already in this neverending cycle.

P.S. I really do hope signon bonuses and points continue to be devalued so people who abuse these privileges learn their lesson of not being too greedy.

 

[Lynda2475]

I really do hope signon bonuses and points continue to be devalued so people who abuse these privileges learn their lesson of not being greedy.

Applying for a publicized offer, meeting the spend criteria and receiving the promoted bonus is not abuse, and has nothing to do with greed.

Feel free not to participate in such offers, but to call the behaviour of those that do abusive and greedy is ill informed (and perhaps a sign of jealousy).

One can just as easily argue it is greedy and selfish for those who have no ability or intention to service their CC debts to incur them (take on unnecessary credit) in the first place.

Interesting you are not willing to proffer any suggestions about what you yourself do or responsible credit users are supposed to do because of the irresponsible credit users (the real abusers)?

 

[JohnK]

But that isn't what was said, you absolutely can't use one CC to pay another.

Cash advances are just another poor decision as interest on cash advances accrues immediately (not after interest free period), again this is explained in the PDS/T&Cs.

Oh @Lynda2475 please don't start. I respect your posts but....

Teenagers getting pregnant is a poor decision too. Do they know better? Probably not but that's still not an excuse with all the education they get.

You're assuming that everyone that's in debt thinks logically and knows exactly what they're doing. If you lived a month of my life you'd either commit suicide or end up in mental institution.

There are single mothers out there that have 3 or 4 kids to different fathers and yet society takes care of them.

Why wouldn't we help gamblers and those in debt?

The first thing we should do is make gambling illegal. Especially pokies online. It achieves nothing and helps no one other than greedy criminals.

Lock down pokies and do not allow low income earners to play. No its not everyone's right to be able to play pokies and throw away money. Do you realise there are kids who do not have adequate clothing or balanced meals? Do we ignore them?

Bring down credit card interest rates. If that means some of the rich lose benefits then it's a small sacrifice for the greater good of all.

 

[Lynda2475]

Most of that is off topic - credit use has no bearing on teenage pregnancy rates.

I am a strong person I certainly wouldn't commit suicide because times get a bit tough financially. Only in the case of terrible terminal illness.

Perhaps look at the history prohibition of alcohol which was a universal failure just drove drinking underground into speak easies run by the mob and other undesirables.

So taking away legal credit avenues will just see a rise in loan sharks without any government regulation which will result in physical violence when debts are paid instead of interest.

I personally don't see the appeal of pokies, the TAB or casino, but how do you propose to limit who can play ? Removing cash and requiring a card that has a hard limit per time period is one way but then the bleeding hearts complain the government is controlling how people spend their money.

Education is key, prohibition doesn't work. And taking away high value black cards from those who can afford to service them again does naught for low income earners making poor financial decisions.

 

[JohnK]

Education is key, prohibition doesn't work. And taking away high value black cards from those who can afford to service them again does naught for low income earners making poor financial decisions.

It brings down interest rates.

Plain old Amex Gold or Amex vanilla Platinum with interest rate of 22.99%.

Plain low rate no frills credit card with interest rate of 12.99%.

Why such a huge difference? In fact most cards with signon bonuses and points earning are high interest rate cards.

I don't know how you stop gambling for low income earners but if you are someone who constantly seeks assistance for rent, clothing, food stamps etc you should not be allowed to gamble. There is zero reason you should have any right to gamble.

My point was lots of people make poor decisions. We choose to help some and ignore others. As a society that's poor.

 

[serfty]

I don't know how you stop gambling for low income earners but if you are someone who constantly seeks assistance for rent, clothing, food stamps etc you should not be allowed to gamble. There is zero reason you should have any right to gamble.

Credit card gambling ban expanding to cover online bets

Using credit cards to gamble online will be outlawed by legislation being introduced by the government to widen an existing ban on betting with plastic.

www.perthnow.com.au

The federal government will introduce legislation to parliament on Wednesday banning credit from being used to bet online, which will also include digital currency like bitcoin.

Under the new laws, companies that don't enforce the credit card ban will be slapped with a fine of more than $234,000.

 

[Gremlin]

@Lynda2475 some of your posts in this thread genuinely come across as victim blaming.

Let me give you a little more history about my cousin. She was in an abusive relationship. Physical, sexual and financial abuse was part of her day to day life. She worked for the family business, that is to say, HIS family business, so leaving the relationship also meant leaving her income. Not that it was 'hers'. Her salary was paid into 'their' bank account, which only he had control over.

She was strong enough and brave enough to make the decision to leave, but needed some money that wasn't controlled by him to enable her to do it. She got knocked back on several credit card applications but eventually found herself with two low limit cards that she had hidden from him. Her intention was to use one to help her escape and the other for emergency only. They got her free, but into a different kind of financial entrapment.

Comments such as "There has to be some personal responsibility. Don't spend money you don't have" speak to a level of privilege not afforded to my cousin in her circumstance. 'Advice' like that, to a woman being abused every day, who has no access to her own money, reeks of victim blaming. Whilst your comments resonate with those in control of their finances, who aren't facing difficult financial decisions every day, a disproportionate number of people who are accruing interest are those who have suffered in life's lottery through little to no fault of their own.

Sometimes empathy towards those in more difficult circumstances than you may be facing yourself is not unwarranted.

 

[Gremlin]

BTW, my credit card is due. I just paid it directly from a second, unrelated card. I then immediately paid off that other card in full (so I won't accrue interest on that second card). Just to see whether your assertion that it can't be done was true. Transaction went through fine.

 

[Lynda2475]

For there to be victim blaming there has to have been a crime.

If the cc company did something illegal, take action. If they simply provided a legal product under the exact terms which were advertised and disclosed when the customer decided to sign-up, no crime, no trap.

Your cousins situation is incredibly sad but per the discussion here it did not arise because credit cards exist and certainly not because responsible credit users have points earning cards.

The crime in your cousins situation was committed by her abusive husband (and possibly his family). No CC provider is running an advertising campaign claiming to be the solution or way out for abuse victims.

You can have empathy without accepting flawed argument that CCs exist only to trap the vulnerable.

Banks are not charities, they exist to profit shareholders. John M suggest that culling awards and higher income qualifying cards will see interest rates drop. I disagree, they charge what the market will bare and one only need to look at newer forms of credit like after pay (which has equivalent rates) and arguably used more by low income earners as has fewer of the usual credit qualification hurdles. Which is why there is lobbying now to make them subject to regulation.