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Line Of Credit or Revolving Line Of Credit means a Credit Cardholder with say a $10,000 Card Limit on their Credit Card can make Purchases up to $10,000 and take receipt of those purchased items where the - (i) Credit Cardholder's Credit Card Issuer puts the Merchants in funds for the cost of those Purchases on the date of each Purchase; and (ii) the Credit Card Issuer does not charge the Credit Cardholder for the cost of those Purchases for 'up to 55 days' later.
For the vast majority of Credit Card Products, the Credit Cardholder pays no interest for its Line Of Credit for the Interest Free Period 'up to 55 days', provided it repays the Credit Card Issuer the full amount of the Previous Month's Purchases which aggregates to the Closing Balance by the Payment Due Date.
The Writer has two Credit Cards which he has set up 'Monthly Debits' for his primary banker to automatically debit his savings bank account to repay his Closing Balance each month on the Payment Due Date. He enjoys a minimum of 28 days and a maximum of 42 days interest free on his Purchases. Neither Credit Card charges an Annual Cardholder Fee. For approx. 20 years, the Writer has paid no fees/interest on his two Credit Cards, which each provide 'up to 42 days' Line of Credit. Yet he has made Purchases which aggregate more than $350,000. He is not alone. There are many Financially Educated Credit Cardholders that similarly enjoy a 'up to 42 days' Line of Credit at no cost, without contributing to the high cost of providing the multiplicity of Credit Card Products.
Enjoying a Line Of Credit by paying up to 55 days later for goods and services received, rather than visiting an ATM to draw cash and then carry cash the way consumers did 20 or more years ago is a material convenience and security benefit. Paying Tap and Go with a Credit Card (on ave of 350 times each year) per Credit Cardholder is a highly sought after and convenient payment method for many millions of Australians. Yet one third of all Credit Cardholders (Revolvers) pay the provisioning $ costs of the other two thirds of Credit Cardholders (Transactors).
The Writer argues that Revolvers (33% circa of Credit Cardholders that possess only Level 1 or Level 2 Financial Literacy) would not pay the provisioning costs of Transactors (67% circa of Credit Cardholders that possess Level 3, 4 and 5 Financial Literacy) Lines Of Credit if the Australia's Principal Regulator of the Payments System observed/applied its Parliamentary Bestowed Mandate to regulate the User Pays Principle to Credit Card Products. Sadly in April 1985 Australia's Principal Regulator of the Payments System 'tossed in the towel' by Deregulating Credit Card interest rates by removing the 18% Cap because regulating (from the late 1970s) Australia's burgeoning NBFIs was beyond the RBA's capabilities, notwithstanding its Parliamentary decreed regulatory obligations. It would have been better to merely raise the Cap to 24% or thereabouts, and lower it as the RBA pruned in inflation and associated interest rates.
When the exceedingly high interest rates of the 1970s and 1980s began to fall, Australia's Principal Regulator of the Payments System should have re-imposed a Cap on Credit Card interest rates as required under the RBA's Parliamentary decreed regulatory mandate that has existed from the launch of Bankcard in 1974.
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