What you need to know about your credit cards in 2019

Most of us have one or more credit cards that can be very useful in managing our finances. However, whilst there are many good reasons for credit cards, they can also lead us into debt that can spiral out of control, resulting in more harm than good.

This is why ASIC has introduced changes to the way we use our credit cards, hoping that these changes will result in fewer people becoming trapped under an increasing amount of debt. The first of these changes commenced in July 2018 when credit card providers were prevented from sending you unsolicited offers about increasing your credit card limits.

This means that to increase your credit limit you must now contact your credit card provider yourself, but the amount of credit you can access changed in January 2019. Two other changes also came into effect at the same time in January and whilst we will mention all three of these changes, the one that actually effects your credit limit will have the biggest effect on how you manage your money.

1.     Credit card limits

This is the change that will most probably have the greatest influence on your finances, because there are now stringent rules that restrict your credit card limit to the amount you can repay in full, within three years. Of course, you don’t need to repay this amount in full within three years, it is just the strategy that ASIC is using to help people from spiralling into deeper debt.

This means that if you currently have a credit card with a limit that you could not pay off in three years (regardless of how much credit you have accessed on that card) and want a second credit card, your best strategy is to reduce the limit on your current card to one that you could repay in three years. Otherwise, you may not be able to hold another credit card or the limit may be very low - because the limit on one credit card affects the limit on other credit cards.

This can cause problems if you want to transfer your debt to a 0% p.a. interest rate credit card, particularly if the debt you want to transfer is now greater than the limit on the new credit card. In this case, you would be better reducing your credit card debt to one that can be transferred to a 0% p.a. interest rate card with the lower limit or apply for a personal loan.

2.      Cancelling credit cards online:

You are now able to easily cancel your credit cards and reduce your limits online and the credit card providers must not try to offer you alternative strategies. This takes the angst out of trying to lower your limit or cancel a card, when the provider is trying to persuade you otherwise.

3.      Interest free days:

Credit card providers can no longer backdate interest charges to when you first made a purchase, when you don’t repay the full amount by the due date of your statement. Your provider has most probably already contacted you about this particular change.

Ultimately, these changes are aimed at reducing credit card debt, but if you still need help organising your finances, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.

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