Do you feel supported by your credit card provider?

man sits at a cafe with a plant behind him looking at his phone banking with his laptop open and gives a thumbs up because he feels supported by his creditor during Australian covid lockdowns

According to new Experian research, 60% of Australians feel creditors and lenders successfully provided financial assistance to those experiencing hardship during the 2020 COVID downturn.

That said, over half of those surveyed also feel that support from financial institutions is even more essential today than it was last year.

Australians are currently sitting on around $20 billion in credit card debt that is accruing interest, according to RBA data released July 2021. Although this has reduced by almost a third over the last three years, that reduction has been stagnant from mid-2020 onwards.

Additionally, June is the first month that the Australian Bureau of Statistics (ABS) has reported a percentage decline in fixed-term personal loans in 2021. Despite the decline, it still recorded a 16.9% increase on June 2020, at almost $1.75 billion in loan commitments.

With such an accelerated rate of borrowing right up until the most recent lockdowns, this is a potential point of concern, as many face sudden financial difficulties caused by COVID restrictions.

Experian’s Australia and New Zealand general manager of decision analytics, Mathew Demetriou, explained that “as several states in Australia entered lockdowns, we once again saw lenders step up to offer more flexible plans to those in need.”

“For example, one Big Four bank extended its freeze on foreclosures for customers unable to meet their loan repayments, while another offered credit card repayment and interest rate reductions,” he said.

But many of the Experian survey respondents felt that credit providers and lenders could do more to support their customers during these tough times.

One specific area of improvement that they cited was that creditors should be more easily contactable through multiple modes of communication.

Is your lender contactable?

The people surveyed believed that it was important for creditors and lenders to be available to their customers during times of potential financial hardship.

  • 20% think there are not currently enough ways for them to communicate with their provider.
  • Over 30% of Australians think offering a mix of digital, and over phone is best.
  • Another 20% would prefer to only chat to someone over the phone.
  • Interestingly, 1 in 5 would prefer to seek support through digital channels only.

“Whether a person is in hardship or facing hardship, it is critical that credit providers offer multiple channels of support, including self-service options,” said Demetriou. “For example, asking for support through digital channels is often less confronting than speaking to someone over the phone.

“Credit providers who are able to understand the preferences of a customer can create a far more personalised service. This helps to reduce the friction when addressing financial stress, which in turn, could help put people on the path to recovery from hardship more quickly.”

Is your bank or lender looking out for you?

Experian’s research also revealed that many consumers are not aware that some creditors and lenders can predict financial stress before customers miss a payment.

  • 44% of respondents think credit providers can only identify if they face hardship when they default on a payment.
  • One fifth believe that they must reach out to the lender or creditor themselves.
  • While 1 in 10 Australians think things like a change in income or spending habits can act as a trigger for lenders.

Missing a payment is, in fact, not the only way for credit providers and lenders to identify if someone could face money trouble in the near future.

Possible triggers that financial institutions look out for include: a loss or drop in income, greater reliance on savings, a shift in spending to high priority items, and an appetite for high-cost loans.

“To help identify early signs of financial stress, it’s so important for credit providers to be able to see all of the financial products a customer has across different financial institutions, as a customer may look healthy in one portfolio but looks different in another portfolio,” added Demetriou.

Would you want your finances monitored?

The research also showed that, knowing it was possible, one half of Australians wish credit providers and money lenders would proactively monitor their customers’ financial health to help prevent people from falling into financial hardship.

However, 80% admit they do not know if their provider currently provides this service.

“Proactive assessment doesn’t just show genuine care for customers and cement your reputation as a fair and socially responsible business, it is crucial in being able to identify and assist those who may be financially vulnerable and at risk of facing hardship.

"Ultimately it helps lenders make appropriate lending decisions for each individual and offer the right support at the right time, while also giving customers confidence they are supporting them at all times,” said Demetriou.

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Compare credit cards - last updated 24 January 2022

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