7 Ways The Banking Code of Conduct Helps Your Credit Card

7 ways the banking code of conduct helps your credit card

  • Switching to new credit cards just got easier.
  • No more unsolicited credit card limit increase offers.
  • Close your credit card account online, and more.

In the wake of the Royal Commission into financial services, out has popped a revised Banking Code of Conduct which came into effect on the 1st of July. While it isn’t a huge shakeup, it’s a set of significant baby steps that have been brewing for years, designed to protect you – the consumer. 

But will the changes really mean much? Well, yes, according to the CEO of the Australian Banking Association who says: “Whether it’s through your credit card, home loan, small business loan or just day to day banking, Australian customers will see tangible benefits from this new Code.”

Here’s what the new banking code means for you

More control for consumers, more simplicity and less jargon. 

No more unrequested credit card limit increases

Ready to up your credit card limit? You can still do that but you’ll no longer be offered an unsolicited credit card limit increase which means you’ll now need to ask your bank for an increase. They can’t nudge you. It means you’re in more control of your credit limit and can ask for more when you’re ready, rather than be tempted to take more than you perhaps need. They’ll assess your ability to repay the amount of the credit card limit within a five year period. The same five year period assessment goes for new card applications too.

Switching credit cards & banks just got a little easier

You might have set up a bunch of regular recurring payments from your credit card to pay for services. Now when you switch cards, typically when you do a balance transfer, you can get your credit card provider to give you a list of direct debits to help you jump ship. We would love to see a portable credit card number that you can take with you to new card providers (like you can with your mobile phone number) but this is a great start. 

30-day intro offers ending reminder

With so many great credit card offers out there it’s easy to pick a card, enjoy its benefits and forget when the introductory offer ends. Especially for balance transfers. Now, the banking code requires each credit card provider to remind you 30 days out when your introductory 0% balance transfer period is about to end. The code does not specify how banks can do this i.e. letter in the mail or an email.

Credit card debts with higher interest get paid off first

Carrying a balance on your credit card? That’s called accruing interest. Any payment you make to your consumer credit card will be applied first to the amounts that have the highest interest rate as at the last statement date. This is the opposite of the Dave Ramsay snowball method. It’ll mathematically save people more money but doesn’t generate the same personal momentum if you are on the road to being debt free. Still, it’s a good move. We’ll take it.

Closing your card down online

It’s easy to apply for a credit card online, but up until now, you had to phone your credit card provider to close your card down. Now, if you want to shut down your credit card account, for whatever reason, you can go through the shutdown process online, or over the phone.

Selling add-on credit card insurance

You can no longer be sold add-on credit card insurance at the point of sale when taking out a credit card or personal loan. Lenders have to wait at least four days after you have applied before they can approach you – to give you time to really consider if you need it. And they need to be clearer about the product.

Increased transparency with foreign exchange rates

If you use any foreign exchange service (other than by credit card, debit card, or travellers’ cheque), you’ll now get details of the exchange rates and commission charges that will be applied. Also, if you send money overseas you’ll now be told when the money is expected to arrive in the recipient's account.

Banks must offer and promote low-fee products to low-income customers

Perhaps one of the best changes, this baby step is great for anyone on a lower salary. Traditionally banks would promote any offer to its low-income customers. Let’s say your salary is lower than average if you applied for one of these offers you’d be ineligible to meet the income criteria (amongst other things) and would be declined, which damages your credit score.

“The new Code will form part of every customer’s relationship with their bank and will be strongly enforced both by an independent body, the Banking Code Compliance Committee, and the Australian Financial Complaints Authority,” says Ms Bligh.

The final component of the new Code calls for stronger enforcement and compliance. For jaded Aussie consumers, this change is definitely welcome as it’s easy to feel like banks aren’t regulated enough. Changes include strong protections for customers with serious consequences for banks that breach the code. The independent Banking Code Compliance Committee (BCCC) will also investigate alleged breaches of the Code and will apply sanctions where applicable. 

Banks that breach the Code will be formally warned by the BCCC and publicly named. The bank in question will have to take corrective action including things like training staff and undertaking compliance reviews. All of the above enforcement and compliance will be enforced through the courts and the new Australian Financial Complaints Authority, if necessary. 

“Banks understand they need to change their behaviour and this new rule book represents an important step in earning back the trust of the Australian public,” Ms Bligh, Australian Banking Association CEO said.

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