Grounds/Reasons for Written Questions

Chapter 3.        Basic Credit Card of 55+ years ago now includes 'Sweets', 'Sours' and 'Spiders'

The ubiquitous Credit Card is the solitary 'service' instrument omnipresent throughout the industrialised world that has morphed -

*           from a simple Charge Card some 65 years ago where the monthly Total Amount Owing had to be repaid in full at the end of each month in order to be allowed to continue using the Charge Card

*           to a Revolving Line Of Credit with a luring Interest Free Period with over 16 million Credit Cards held by Credit Cardholders across Australia that is NOT 'priced' according to the 'User Pays Principle'.

Australian Bankers Association response to the Inquiry into credit card interest rates - 2015 notes that "The credit card market is very competitive with at least 70 different providers and 200 different products." 

 

 

70.19% of Australian adults own a credit card  -

(a)        with an annual fee from Nil up to $700 pa for Citi Prestige Visa Card - invariably a tax deduction - (offering a welter of 'goodies' including 70,000 bonus Reward Points and 2 Reward Points per dollar spent - the American Express Platinum Business Charge Card costs a whopping $1,500 annually fee because it provides 100,000 bonus Membership Reward Points if the cardholder spends $5,000 in initial 3 months);

(b)        where the Credit Cardholder might Forfeit Interest Free Period And Pay Interest On Each Purchase From The Purchase Date if repayment of the monthly Total Amount Owing is "a day late or a dollar short", whereupon the applicable Interest Rate is applied from the date of each Purchase during the previous month and the Interest Free Period is cancelled for the following two months;

(c)        complimentary travel insurance;
(d)        zero interest balance transfer for up to two years - but read the fine print, and then read it again;

(e)        Reward Points;

(f)         may receive a waived annual fee for the first year; and

(g)        frequent-flyer points.

 

Re (b) above, for most of the 55+ years existence of Credit Cards, the Credit Cardholder paid Interest on any part of the Total Amount Owing that was not repaid by the Payment Due Date.  If the Total Amount Owing was $500 and the Credit Cardholder repaid $400 by the Payment Due Date, the Credit Cardholder paid Interest on $100 until the remaining $100 was repaid.  And then the Interest Free Period was re-instated.  Slowly but surely, almost all Credit Card Issuers have moved from the former interest charging model of charging interest for only any shortfall until repaid, to charging Interest for all Purchases if the Total Amount Owing is not repaid by the Payment Due Date.  Some Credit Cards also withdraw the Interest Free Period for up to two subsequent months if the Total Amount Owing is not paid by the Payment Due Date which means that if a cardholder failed to pay the Total Amount Owing in the third month, he/she could forfeit their Interest Free Period for five months, and many Credit Cardholders have so forfeited.

Credit Cardholders with poor Financial Literacy Skills are much more prone to not repay the Total Amount Owing by the Payment Due Date and then be severely penalised as in (b) above.

 

 

Product Differentiation is a fundamental of micro-economics - making a homologous product (low barriers to entry) different from your competitors' similar homologous product to attract sales.  (c) to (g) above is a shining example of Product Differentiation for the 'core purpose' of the humble plastic namely a quick swipe to establishes the Purchaser's 'ability-to-pay' to pay.

The term, Grace Period, is used in North America and Europe to describe what Australians call the Interest Free Period.  The first universal Credit Card, which could be used at a variety of establishments, was introduced by the Diners' Club Inc., in 1950.  Another major Credit Card of this type, known as a travel and entertainment card, was established by the American Express Company in 1958.  Diners Club and American Express' decision to provide a Grace Period as an inducement/lure when mass marketing their 'new fangled' Credit Cards in the early 1960's has proven to be a marketing 'master stroke'. 

 

The 55 years morphosis of the once humble Credit Card that now boasts (c) to (g) above and the premeditated deceit within many newspaper and on-line Credit Card adds, is both breaching and stretching the obligation to provide a Key Facts Sheet (pursuant to NATIONAL CONSUMER CREDIT PROTECTION REGULATIONS 2010 - SCHEDULE 6) with each Credit Card Application Form. 

 

 

Some Spiders

Some Credit Card Issuers' monthly Card Statements:
*            list at the bottom of the schedule of all Purchases the 'Payment Due' being the aggregate of all Purchases

*            provide a Summary (boxed) Table the 'Minimum Payment - Due' eg $39 and immediately below in bold font black the 'Payment Due $39'. 

The full 'Payment Due' amount (being last month's Purchases) is not listed in the Summary Table that Credit Cardholders invariable focus on.  If the Credit Cardholder observed the Card Issuer's direction, then the Credit Cardholder -

A.)         would be charged interest on all their Purchases for that month at the Usurious Interest Rate of up to 25.9%; and

B.)         would forfeit their Interest Free Period for the next two months and therefore be charged interest on all their Purchases for the two following months at the Usurious Interest Rate up to 25.49% from the date of each Purchase. 

Clause 18.1 "Interest charges on purchases and our fees" of St. George Bank's Conditions of Use - Credit Guide (Effective: 20 May 2014) has evidenced a lot of St George Credit Cardholders losing their Interest Free Period for a minimum of three months and paying 20% on all Purchases from the date of each Purchase - explained in Example 1 of Nine Examples of Unconscionable Conduct in Labyrinth of ‘Concealed Spiders’.

Nine Examples of Unconscionable Conduct listed in Labyrinth of ‘Concealed Spiders’

 

The modern Credit Card is a testament to the worst features of greed and covetousness within financial services in Western society.  
No other 'good' or 'service' in the market place gets within a Bulls Roar of today's Credit Card for many Financially Literate Credit Card Issuers abusing Financially Uneducated And Vulnerable Australians.