Looking to blast away credit card debt with a balance transfer? This is how the January 1 changes could affect you

Tom Watson

29 Jan 2019

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Christmas presents, food, overseas travel - the summer holidays are without a doubt one of the best times of the year for many Aussies. But at the end of the day all that fun needs to be paid for, so it’s hardly a surprise that many let their credit card spending balloon out more than it should over the period.

But now that the summer holidays are officially over or coming to an end for most Australians, a financial reality check may be setting in for those who need to face up to their credit card debt.

Traditionally one popular option for dealing with unmanageable card debt has been to make use of a balance transfer, but a number of recently enacted credit cards reforms may make it harder for some Australians to apply for a balance transfer card this new year.

RELATED: The 2019 banking changes you need to know about

As of January 1st, credit card providers will have to adhere to a number of ASIC and government backed reforms including:

• Lenders will need to be stricter with their approval and vetting process to ensure new cardholders are able to repay the card’s credit limit in under three years. This could affect existing cardholders with debt wanting to make a balance transfer.

• Credit card providers can no longer charge interest on balances, retrospectively. Previously they would have been able to backdate the interest to the date of purchase if you hadn’t paid your full balance off for that period.

• Providers are obliged to let credit card holders ask for their limits to be reduced or for the contract to be cancelled. Both of these options must all be made available online.

The reforms come on the back of an extensive review conducted by ASIC of 21.4 million credit card accounts between 2012 and 2017 which found that 1 in 6 (18.5%) of consumers were struggling with credit card debt.

Balance transfer credit cards - rates updated daily

  • Promoted

    Apply By 10 March 2020

    Virgin Money Virgin Australia Velocity Flyer Card - Balance Transfer Offer

    0% p.a. for 22 months and then 20.99% p.a.

    20.74% p.a.

    $129

    Get in the air with a $129 Virgin Australia Gift Voucher each year. Earn 3 extra Velocity points per $1 spent on top of the standard earn rate for the first 3 months (capped at 10,000 points per month. 0% p.a. for 22 months on balance transfers.

    • 0% p.a. for 22 months and then 20.99% p.a.

    • $129

    • 20.74% p.a.

    • 55

    • 20.99% p.a.

    • 2.7%, Min $2.70

    • Points are credited to the Velocity Frequent Flyer program.

    Read our Mozo Review to learn more about the Virgin Australia Velocity Flyer Card - Balance Transfer Offer

    Details Close

  • Promoted

    American Express Velocity Escape Card

    0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    20.74% p.a.

    $0

    Earn up to 1.75 Velocity Points. Have limited stress with the Velocity Escape with no annual fees and receive 0% p.a. on balance transfers for the first 12 months, a one-off credit plan establishment fee of 1% applies. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2019.^ T&C’s apply

    • 0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    • $0

    • 20.74% p.a.

    • 55

    • Points automatically transferred to your Velocity account

    Read our Mozo Review to learn more about the Velocity Escape Card

    Details Close

  • Promoted

    Bankwest Breeze Platinum Mastercard

    0% p.a. for 26 months and then 12.99% p.a. (2.00% balance transfer fee)

    12.99% p.a.

    $99 $49 in the first year

    0% p.a. on balance transfers for 26 months (2% BT fee applies). Streamline your budget with a low ongoing interest rate of 12.99% p.a. Plus, enjoy complimentary overseas travel insurance as well. T&Cs Apply

    • 0% p.a. for 26 months and then 12.99% p.a. (2.00% balance transfer fee)

    • $99 $49 in the first year

    • 12.99% p.a.

    • 55

    • 21.99% p.a.

    • 2%, Min $4.00

    Read our Mozo Review to learn more about the Breeze Platinum Mastercard

    Details Close

  • Promoted

    American Express Qantas Discovery Card

    0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    20.74% p.a.

    $0

    Receive up to 1.75 Qantas Points for every $1 spent on Card purchases (T&Cs apply). No annual fee for the life of the card. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2019.^ T&C’s apply

    • 0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    • $0

    • 20.74% p.a.

    • 44

    • Points are automatically credited to the Qantas Frequent Flyer programme.

    Read our Mozo Review to learn more about the Qantas Discovery Card

    Details Close

And given that any Australians who are nursing credit card debt are likely to begin looking at debt-reducing options soon, Michael Blyth, ARCA Responsible Lending Expert at consumer education website www.creditsmart.org.au, believed that this could be the first time many become aware of the reforms.  

“One of the peak times of the year is in February as people start to look at refinancing the debt which they picked up over Christmas, so for many the changes probably won’t become real until they actually apply for their next credit card,” he said.

“My expectation is that the vast majority of consumers who were previously entitled to a credit card will probably still be able to get a credit card, although it might have a lower credit limit.”

RELATED: Balance transfer cards explained, at last

For Aussies who are unsure about their credit health or are wanting to take some proactive steps to ensure they will be able to apply for products like credit cards in the future, CreditSmart have offered the following tips:

Take control: Information is power, so a great first step to take is by actually finding out what’s on your credit report. The best thing is that Australians can get a copy of their credit reports for free from major credit reporting bodies like Experian and Equifax.

Be realistic: Whether it’s a credit card or a personal loan, limiting yourself to an amount of credit which you can realistically handle and pay off could keep you out of trouble down the track.  

Maintain good habits: While the implementation of comprehensive credit reporting will likely mean that providers have greater access to the positive aspects of your credit history it’s still important to make your credit card, personal loan and home loan repayments each month.     

Don’t despair: If you are struggling to make your credit card repayments or repayments on any other loan, make sure you contact your provider because they may be able to help you through a difficult spell.

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