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BUY NOW, SUFFER LATER: HOW BANKS CASH IN ON CREDIT-CARD BATTLERS (Australia)

Posted by Gilmour Poincaree on December 10, 2008

December 10, 2008

by Kelly Burke – Consumer Affairs Reporter

PUBLISHED BY ‘THE SIDNEY MORNING HERALD’ (Australia)

Consumers are racking up more than $1 billion in cash advances on their credit cards in a single month, marking a 14 per cent increase on the same time last year.

With the exception of dubious pay day lenders, cash advances on credit cards are one of the most costly ways of borrowing money, with daily interest calculated at as much as 21 per cent with no interest-free period.

Yet according to the latest figures from the Reserve Bank, credit card holders withdrew $1092 million in cash from their credit card accounts in September, an increase of $134 million compared to last September.

The number of credit cards held by Australians has also increased by 10 per cent over the past year, prompting the NSW Opposition yesterday to accuse the State Government of defaulting on its responsibility to ensure ethical lending practices for credit cards.

In May last year, the then Minister for Fair Trading, Linda Burney, announced that the NSW Government was “leading the push to rein in credit card debt”, promising to crack down on providers offering easy access to credit cards without any rigorous assessment of the card holder’s ability to repay, and offers of large increases in credit limits on existing cards.

Since then, a discussion paper on the issue, promised in December last year but delivered eight months late, concluded that the introduction of any new credit laws in NSW would take between three and five years.

At a subsequent Council of Australian Governments meeting in October, it was agreed the responsibility for the regulation of credit card lending practices be gradually transferred to the Commonwealth from next year.

Ms Burney’s successor, Virginia Judge, said the NSW Government was now assessing the submissions received on the discussion paper and would report back to the Commonwealth early next year. But the Opposition’s spokeswoman for Fair Trading, Catherine Cusack, said the Government appeared to have lost interest in credit card reform and no longer considered the issue important.

The RBA’s latest $1092 million figure for monthly credit card cash advances is not a record. The figure first tipped the $1 billion mark in December 2004 and since then has fluctuated between $869 million and $1114 million.

The co-ordinator of the Consumer Credit Legal Centre, Karen Cox, said with the exception of people using the cash advance service for topped-up credit cards while holidaying overseas, consumers resorting to cash advances did so because of extreme financial stress, rather than through choice.

Christopher Zinn, a spokesman for the consumer advocate group Choice, said many people were not aware of the hidden costs associated with cash advances, including the practice by some billers of counting payments made through Bpay using a credit card as a cash advance.

Moreover, low interest rate cards can sometimes charge the most for cash advances. An ANZ Balance Visa card, for example, charges an interest rate of just 13.41 per cent, but its cash advance rate is 20.41 per cent.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE SIDNEY MORNING HERALD’ (Australia)

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One Response to “BUY NOW, SUFFER LATER: HOW BANKS CASH IN ON CREDIT-CARD BATTLERS (Australia)”

  1. A cash advance loan may work better for you than credit cards. The credit cards take longer to pay. With a loan you have one payment at one loacation. It’s a easy loan process, and at some companies you start paying off the loan after so long.

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