Seeing lots of credit card advertisements? Here’s why
September 27, 2009
With increasing numbers of credit card users switching to debit cards to minimise debt and control spending, banks have stepped up their marketing campaigns in an attempt to woo at least some of them back.
According to figures compiled by the Reserve Bank of Australia, credit card usage rose only 3.0% by volume and 1.7% by dollar value between July 2008 and July 2009. During that same time frame, debit card purchases surged 32.5% by volume and 31.3% by dollar value.
Credit cards have a reputation as expensive and risky for the budget, as it can be easy to spend more than intended when the credit limit keeps saying yes to additional purchases. Debit cards, on the other hand, are limited by the amount of money in the associated transaction account and therefore it’s supposedly easier to maintain control of one’s spending. Besides, with the ongoing global recession and its risk of unemployment and loss of income, many Australians are limiting the amount of debt they’re willing to assume.
While credit cards may not always be the best idea for the consumer, they’re a highly profitable enterprise for the banks and credit card providers, and so this downturn in borrowing has been met with an aggressive marketing campaign designed to change the market dynamics. Households are seeing a veritable deluge of brochures and other advertisements, touting credit cards of every description, including some new and imaginative products.
However, industry experts say there may be another reason for the shift in spending patterns.
A study released by MWE Consulting compared the credit card industry across Ireland, New Zealand, Australia, and the United Kingdom. Their research shows that the market is still developing and growing only in Australia. In the other four, it’s mature and therefore stagnant.
By aggressively marketing their wares in Australia, the credit card companies are seeking growth in one of the few places it’s to be found.
An example of the new offers comes from Commonwealth Bank, some of which are scheduled for release next month.
The Low Fee MasterCard carries no annual fee for Commonwealth customers who use the card to spend at least $1000 each year. Its interest rates are 18.49% p.a. for purchases, 19.99% p.a. for cash advances, and 5.99% p.a. for balances transferred from competing credit cards during the first five months the account is open. It does not offer a rewards scheme, but does offer up to 55 interest free days.
The Low Fee Gold card offers no annual fee for Commonwealth customers who spend at least $10,000 each year with the card, also with up to 55 interest free days and with gold card benefits.
A third offer, the Low Rate Gold card, has interest rates of 11.74% p.a. on purchases, 19.99% p.a. on cash advances, and 5.99% p.a. on transferred balances for five months. It also offers gold card benefits, such as complimentary international travel insurance.
Commonwealth is also revamping their rewards scheme through a new alliance with American Express. Now cardholders with the Commonwealth Awards product will receive one account with two credit cards—a MasterCard with almost worldwide acceptance, and an American Express, which receives additional rewards points when used.
With the Australian credit card market barely growing, and that in much of the rest of the English-speaking world currently stagnant, Australians can expect the number of such offers, improved, upgraded, and new, to continue unabated as banks fight for all the business customers are willing to give them.
Source: SMH : Credit Card Marketing Intensifies
Why You Might Not be Eligible for Interest Free Days
Do you apply for credit cards without worrying too much about the interest rates? If you always take advantage of interest free days you might — you would avoid interest payments altogether, regardless of the interest rate. But did you know that you might not always be eligible for interest free days?
Here are some situations where interest free days might not apply, or where you might receive fewer interest free days than expected:
1. You don’t pay off your balance in full each month.
If you have a credit card offering interest free days (like the HSBC Gold Visa), chances are very good that your interest free days only apply if your entire balance was paid off during the last statement period. In other words, if you didn’t pay off your full bill last month your new purchases this month won’t be eligible for that grace period before interest starts to accumulate.
2. You have a balance transfer on the credit card.
If you initiated a balance transfer from another credit card, you probably didn’t do that intending to pay off the full balance transfer amount right away. If you thought you could have a balance transfer on the account and still get interest free days on purchases, you might be in for a surprise. Your credit card (e.g. St George Vertigo) requires you to pay off your entire balance to be eligible for interest free days the following statement period — that can include your transferred balance.
Also keep in mind that balance transfer amounts won’t typically be eligible for interest free days of their own. The card’s balance transfer offer (if it has one, like the IMB Rewards credit card’s offer of 3.9% p.a. on balance transfers for 12 months) will apply to your balance transfer — not the interest free days policy.
3. You took out a cash advance.
Just as balance transfers aren’t generally covered by interest free days, neither are cash advances (or purchases used like cash advances, such as buying traveller’s cheques).
4. You made a purchase at the end of your statement period.
If you want to maintain your eligibility for interest free days in the future, you have to pay off your current bill each month. That means if you make a purchase just before the end of your statement period, you’ll have to pay it off before that statement period ends (which might just be a day or two) to maintain your “up to 55 days” or “up to 44 days” interest free on your credit card purchases the following month. Therefore you have to be careful about timing. If you’re not, you might find yourself with fewer interest free days than you expected.
Interest free days make things like rewards cards very appealing to consumers (because you get interest-free purchases and earn rewards in the process). However, you need to understand their limitations. Never assume that your purchases will be interest free.
Below are 3 of our most popular and recommended credit card offers:
Purchase Rate (p.a.) |
Cash Rate (p.a.) |
Balance Transfer |
Interest Free Days |
Annual Fee |
||
 Citibank Clear Platinum |
11.99% | 21.74% | 2.9% for 12 months | up to 55 days | $49 |  More Info |
 ANZ Platinum Credit Card |
0% for 6 months | 21.49% | 0% for 6 months | up to 44 days | $0 first year | More Info |
 Westpac Low Rate Credit Card |
0% for 6 months | 21.49% | 0% for 6 months | up to 55 days | $45 | More Info |
