- Get the skinny on what’s happening to credit cards this year
- Impress your friends with your knowledge about Open Banking and APIs
- Remind yourself about a few things that aren’t changing
You've read A year in review: the most popular credit cards of 2018. Now let's see what to look out for in 2019!
It’s not a good idea to let one of your most vital finance tools – your credit card – get stuck in a rut.
Laws change, technology never stops advancing, new credit card offers arrive almost daily, and the card that suited you 10 years ago may not be the one that’s best for you now.
We help you stay on top of what’s new in the domain of credit cards, while reminding you of a few details that never change.
The Banking Royal Commission
Every Australian financial services institution has been badly shaken by the findings of the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. We can look forward to a higher level of scrutiny of all of the banks’ activities, including credit cards.
While this should translate into more transparency and better deals for consumers in 2019, it’s worth remembering that banking profits have taken a hit as a result of steep fines and customer disenchantment, so there may be less money to throw around to fund rewards points and complimentary benefits. So if you see a good deal early in the year, grab it while it’s hot (after performing your own due diligence, of course).
Meanwhile, the Royal Commission has also focused on irresponsible lending by banks, and while the main concern is the repayment capacity of home loan borrowers, it could result in some tightening in the smaller credit section of the market as well.
The final stages of Comprehensive Credit Reporting
Changes to the credit reporting system which began in 2018 will also start to have an increasing impact in 2019. Australian credit providers were obliged to provide 50% of their positive data about consumers, for inclusion in credit reporting, by 1st July 2018. On 1st July 2019 that figure rises to 100%, which will effectively end the reign of negative-data-only credit reporting.
Our informative article explains what these changes may mean for you and your credit card application.
Other credit card reforms taking effect in 2019
In 2018, changes were introduced to the way credit card issuers manage credit limits, card cancellations and interest charges, following reforms to the National Consumer Credit Protection Act 2009. Since 1st July 2018, credit card issuers have not been allowed to contact cardholders to offer increased credit limits, even though the customer may have previously consented to this. Further reforms took effect from 1st January 2019, including:
- When setting a credit limit, card issuers must assess a cardholder’s ability to repay the whole amount of the limit within three years.
- Customers must be given an online option to reduce their credit limit or close their account.
- Retrospective interest charges will no longer be allowed. Before this, if you didn’t repay your full amount owing by the due date, banks were allowed to backdate interest to the purchase transaction date, effectively cancelling the interest-free days you were supposed to have received.
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This credit card offer is subject to change and may not be directly related to the content of this article.
Open banking is coming to a branch near you
In fact, the ‘branch’ is so near that you probably hold it in the palm of your hand for large parts of every day. Your financial data, collected by your bank and other financial institutions via phone apps, online banking, over-the-counter banking, ATM activity, loan repayments, and credit and debit card purchases and repayments, is a valuable tool. It’s information about your financial habits, and it belongs to you, but until now the banks have been either reluctant or unable to share that data with you and with their competitors.
However, under an Open Banking regime, you will be able to see all your data and, if you choose, have it sent to other banks or finance organisations. You, and your current bank or card provider’s competitors, will have more information on which to base decisions about which financial products are best for you. Competition will be opened up, and new and better products may be developed as a result.
In May 2018 the federal government adopted the recommendations of the Farrell Review into Open Banking. This included the Consumer Data Right, which gives Australian consumers control over their financial data. Beta tests of selected types of data available from the Big Four banks will begin on 1st July 2019, with progressive rollouts to include other financial organisations and eventually all financial data by July 2020. From a consumer viewpoint, this will be a free service.
At the same time, banks are opening up their software systems to external software application developers, with the aim of creating new data-sharing products to improve financial transaction processing for businesses and individuals. This innovation is often referred to as ‘Open banking APIs’. (API = Application Programming Interface).
Other countries, including the UK and European Union, the US and Singapore, have already made substantial progress in open banking. In all jurisdictions, data security and privacy have been primary considerations.
Plus ça change . . .
While there are lots of changes happening in the credit card arena in 2019, there are also even more elements that hold true year after year.
This includes doing your research into credit cards instead of applying for the first one you see, or the one your current bank happens to offer you. Here at Credit Card Compare we pride ourselves on providing you with comprehensive information on hundreds of cards so that you can make an informed decision.
And, while doing your research, consider which kind of card will be the best fit for your lifestyle and spending pattern. Bear in mind that the card that suited you a few years ago, when your employment, income, personal and family relationships and expenses were possibly quite different, may not be the right one for you in 2019.
There’s no better place to begin your search than an enquiry about your own credit score. You may need to improve it, or fix errors in your credit report that are pushing it downwards. Check your credit score with our free credit score tool.
Also remember that your decision is not set in concrete. While it’s not a good idea to apply for lots of cards within a short time frame (because it may have a downward impact on your credit score) you can still apply for a different card and cancel your current one if your circumstances change.
If you do need a different card, there are a few basic pieces of advice about each kind of card that never change, and are as relevant in 2019 as they were ten years ago.
Rewards credit cards
- Rewards cards almost always have the highest interest rates. Don’t choose a rewards card if you don’t expect to repay the full balance every month.
- Rewards cards tend to have high annual fees. Work out whether you will earn enough points to at least cover the fee.
- Frequent flyer points (if used for flights and upgrades) are generally more valuable than other rewards points.
- Exchanging points for merchandise from an online catalogue is usually the least cost-effective redemption.
- Upfront bonus points are a welcome incentive, but don’t forget to consider the card’s other features.
- Watch out for monthly and annual points thresholds (beyond which the earning rate declines) and points caps (beyond which the earning rate is zero).
- Rewards cards often come with complimentary benefits which cover the annual fee several times over.
0% balance transfer offer credit cards
- When working out how much money you could save by consolidating your debts onto a new card, don’t overlook that fact that there may be a balance transfer fee to pay. The fee could be as much as 3% of the transferred amount.
- If you can’t repay the balance in full when the zero-interest period ends, you will be charged interest at the revert rate. This is sometimes the card’s purchases interest rate, but more often it will be the possibly very nasty cash advance rate, which could be as much as 21% p.a.
- Balance transfer credit cards usually have an annual fee, which will effectively reduce the amount you are saving.
- When you have an uncleared balance transfer, you forfeit your normal interest-free days on purchases (unless it runs in conjunction with an offer on purchases – see below).
0% on purchases offer credit cards
- Long zero-interest periods on purchases can be extremely beneficial if you take a disciplined approach to your finances, and squirrel away (in a savings or mortgage offset account) the cash for the postponed repayments.
- But if you use the extended interest-free period as an excuse to spend big on things you can’t actually afford, this kind of deal can trap you into long-term debt because the revert interest rate on uncleared balances after the offer expires can be as high as 20% p.a. or more.
Low interest rate cards
- The interest rate on ‘low rate’ credit cards may still be around 12% p.a – relatively high in absolute terms, compared with, for example, mortgage or personal loan interest rates.
Store loyalty cards
- You need to be a committed shopper at the store in question to make the most of cards from Coles, Woolworths and David Jones.
- Benefits go far beyond points earning, so read the small print to make sure you don’t miss out on any of the in-store or online perks.
Young travellers’ cards
- Cards aimed at young travellers and students tend to be low-fee cards, but this doesn’t automatically mean the interest rate is low as well. Look for a low-interest card if you won’t be paying off your balance in full every month. It will almost certainly save you more than the cost of an annual fee.
- If you’re heading overseas, consider one of the few cards that has no fee on foreign transactions. Some cards charge as much as 3.5% for purchases from merchants located overseas.
Stay informed so that you don’t miss out
In 2019 Credit Card Compare will continue with its mission to create a user experience that makes it easier than ever for people to find a credit card that will save them money and earn more rewards. Read our blog and social media posts to get the latest credit card news, tips, money management tools, interviews and travel reports.
There will also be more Credit Card Compare Online Exclusive Offers, to bring you great credit card deals not available anywhere else.