When we’re asked whether we’ll pay by cash or card at the checkout, we’re likely to reach for plastic. That’s plunged our population into $52 billion worth of debt. We have more than 16.7 million credit cards and each one has an average balance of $4730. National treasurer Scott Morrison has had enough, and he’s taking action.
Morrison plans to introduce a raft of new measures to protect Australians from accumulating excessive amounts of credit card debt. By the end of the year, credit card providers must assess whether individuals can repay their credit limit within a reasonable period of time before approving any new cards. They will also be unable to approach consumers with credit limit increase offers without prior approval. Credit card holders will also be able to reduce their credit card limits or cancel their cards altogether online. The way credit cards calculate interest will also be simplified so Australians can better understand and reduce the excess charges.
“It is vital that we protect vulnerable Australians from predatory behaviour which seeks to make a quick buck from people’s misfortune, and compound their financial hardship,” Treasurer Scott Morrison said in a press statement.
However, Morrison still has his critics. Labor says the promises are nothing more than the reinstatement of old Liberal policies never delivered.
“If the government had delivered on its own commitment last year these reforms would be in place and credit card customers would be getting a better deal,” Katy Gallagher, the Labor party’s financial services spokesperson said.
Meanwhile ME Bank says the changes don’t go far enough to protect ordinary Australians.
“Most people get into serious credit card debt because of an unexpected event, like loss of employment, which the new affordability assessment won’t and can’t predict,” explained Nic Emery, the bank’s head of deposits and transactional banking.
He suggests making changing credit card providers easier would drive down interest rates as financial institutions would face greater competition.
However, Mr Morrison is confident his party’s proposals will ease the debt burden for Australian credit card holders.
“These measures will help protect vulnerable Australians, and ensure financial companies do the right thing by their customers,” he said.
While Mr Morrison’s changes should make getting into greater debt more difficult, they don’t really help people struggling to pay off existing debt. If your credit card balance seems overwhelming, speak to Chase Edwards. We offer a free, no-obligation financial health check to help everyday Australians learn more about their financial situation and how they might change it. Call 1300 854 833 to organise your appointment today.