Defined Terms and Documents       

Concessional Interest Rate Period means applying the User Pays Principle, replacing the traditional Interest Free Period of up to 55 days from the date of each Purchase to when interest begins to be charged on that Purchase with a Concessional Interest Rate Period of 1% (or up to two thirds the Overnight Cash Rate) from the date of each Purchase to up to 50 days from the date of each Purchase, whereupon interest is charged at the applicable Purchase interest rate which may be as high as 25%.

Under the traditional Interest Free Period of up to 55 days, Cardholders generally have between 14 and 25 days to pay their monthly balance.  Under the Concessional Interest Rate Period of up to 50 days, Cardholders would have between 9 and 15 days to access their Monthly Credit Card Statement on the internet to repay their Previous Month's Purchases.    And enjoy two days less to receive their Monthly Credit Card Statement by post.

There are over 16 million Credit Cards held by Cardholders  in Australia netting a national debt of over $51 billion, with around $32.5 billion accruing interest due to not being repaid within the Interest Free Period or from Cash Advances. 

A Concessional Interest Rate Period would 'inter alia' enable a material reduction in Purchase and Cash Advance interest rates which would benefit Revolvers that represent 33% of Credit Cardholders.  Revolvers presently carry $33.1 billion of interest accruing Credit Card debt at an average per Credit Card debt of $8,995 paying interest @ an ave. 17% p.a. = $1,259 pa. interest on average per Credit Card used.  This $1,259 pa. takes no account of Late Payment Fees or that interest commences on a Cash Advance immediately.

McKinsey Report -  May 2014 categorizes 'Five Segments' of Credit Cardholders in the USA.  Below is an extract from the 'Third Segment', namely 'Financially stressed':

"Carry heavy credit card debt—nearly four times the average, at USD$7,453."

The above Australian calc of average of AUD$8,995 debt is per Credit Card used.  The above ave of USD$7,453 from the McKinsey Report  represents agg. debt per Cardholder amongst the 'Financially stressed'.

 

 

The vast majority of Transactors pay less than $100 pa in Annual Cardholder Fee, with many Transactors paying no Annual Fee.  The Writer has two Credit Cards, neither with an Annual Cardholder Fee.

Credit card debt is a leading reason why people seek financial counselling services, according to principal solicitor with the Financial Rights Legal Centre, Alexandra Kelly.

"Typically, they may start with one card and when they reach the limit on that card, they get a second card and a third card and so on," she said. "They end up just shuffling the debts around while the interest compounds, leaving them in unmanageable debt."

The biggest debt Alexandra Kelly has seen on a single card is $90,000, while clients with multiple cards can end up owing hundreds of thousands of dollars.

"We have had cases of people who have accrued debts of $100,000 or $200,000 on multiple cards - that is the worst case scenario," she said.

See Purchase Usage Fee.