Cut Credit Card Interest and Fees: ATM Fees, Promotions and Low Rates
Posted March 26th, 2009
and last modified December 2nd, 2009The average Australian credit card balance over the past few years has been hovering around $3500. Even if you were to transfer your whole stimulus package towards your ‘average balance’, not even a third would be cleared.
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While there’s no simple ‘debt-free solution’ for credit cards, there are steps to take and credit card promotions to be taken advantage of in order to make progress.
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Stick to Specialization
Credit cards always have an angle of profit, no matter how subtle. Always.
A rewards credit card will profit from users which accumulate interest.
A 0% balance transfer credit card will profit from users making purchases on top of their transferred balance.
The occasional ‘credit card multi-task’ is inevitable – yet if you find yourself using your credit card for what it wasn’t designed for too frequently, you may find yourself in more financial strife than if you simply used another credit card. For instance:
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Case 1
- Kim’s Citibank Gold Visa Card has everything she dreams of. She’s planning to go overseas soon, and while her card offers great travel insurance and benefits, she’s aware that Citibank have relatively hefty international fees. She figures that either way, it’s probably just cheaper to use her current credit card for foreign transactions rather than apply for a more specialized credit card.
- While overseas, she makes the following transactions:-$120 purchase-$830 purchase
-$50 cash advance
-$350 purchase
-$200 cash advance
-$20 cash advance
-$400 purchase
-$60 cash advance
-$100 cash advance
-$290 purchase
- Not taking into account the credit cards regular interest rates, in foreign currency exchange fees, she would have paid (3.30% of 1660) $54.78, plus (Cash advance charge of $5 x 5) $25 = $79.78.
- If you applied and used an ANZ First Visa Card:
- Not taking into account the credit cards regular interest rates, in foreign currency exchange fees, she would have (2.50% of 1660) $41.50, plus (Cash advance charge of 1.50% of 430) $6.45 = $47.95.
Therefore, she saved $31.83 by taking another credit card instead.
If you only plan to spend a little overseas, then the savings incentive diminishes. Be on the lookout for the best foreign credit cards in situations like these – the Wizard Clear Advantage Card has no annual fees and no international transaction fees whatsoever, yet is no longer available for application after the Aussie acquisition of Wizard.
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Case 2
- As far as things go, Mark is a very responsible reward program credit card user. In the past 2 years, he’s spent $32,000 on his Commonwealth Bank Awards Card, and earnt roughly $250 worth of rewards. He has paid his balance in full without fail, and is yet to pay any interest.
- An emergency arises, and Mark has nowhere to turn to but to cover the $7000 expense on his credit card. He figures it’s a ‘one-off thing’, and repays $2800 a month until he’s fully repaid his balance after 3 months.
- In this period of time, he’s accumulated $203.99 of interest, practically rendering his hard-earnt rewards obsolete.
- Assuming mark was in a state of decent credit, he could have applied for a St George Vertigo, paid the upfront $55 annual fee, and transferred his $7000 balance and repaid the amount comfortably in the ‘0% for 6 month’ period. After he’s done with the balance transfer, he simply cancels and cuts up the Vertigo.
Therefore, he saved $148.99 by obtaining a new credit card which he could transfer his balance to.
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Qantas Frequent Flyer Transfer Promotion: Ending
If you aren’t aware already, as of March 31st, you will no longer be able to transfer your reward program points over and convert them to Frequent Flyer points. Don’t miss out on this opportunity if you don’t want to be stuck with reward points you aren’t interested in redeeming any other way.
Read more about the Frequent Flyer changes here.
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ATM’s are No Longer Friendly
In a move to cut costs and increase profit margins, Australian banks are either cutting out free ATM transactions, or increasing present charges.
- Withdrawing from your own Bank’s ATM is still safe and free in most instances.
- If a competing bank’s ATM used to charge $2.00 per transaction, don’t be surprised to find it increased to $2.50.
- Your bank’s once generous ‘no withdrawal or transaction fees‘ offer may soon be gone, if it already hasn’t. Citibank Australia once offered this with their ReadyCredit and Personal Credit offers, but now only applies to Westpac and Citibank ATM’s.
- As of March 4th 2009, Australian bank’s have further reformed ATM fees. Among others, ANZ, Westpac, CBA and St.George Bank now impose a charge simply for checking your balance. Either contact your bank to find out if any changes have been implemented, or play it safe and keep your transactions online.
- See the RBA’s March 2009 ATM changes for more information.
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Unlocking Low Credit Card Rates
In terms of interest rates and fees, the cheapest credit cards in Australia either belong to:
- Certain professionals or unions, e.g NSW Teachers CU or Heritage Building Society.
- The smaller ‘more competitive’ banks and financial institutions, e.g Bendigo Bank, mecu and BankWest.
However, there are more factors to take into account rather than surface features. While these smaller financial institutions offer competitive rates, their abundance of bank branches and ATM’s are relatively very low. Especially in light of the new ‘foreign ATM fee’ increase, the costs of owning one of these cards may not compensate when you’re hit with excessive fees by competing banks. As these financial providers work on a much smaller scale, customer service may also be an issue.
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If you know you will generally stick to your own bank’s branch and limit using competing bank’s ATM, these cards will still be ultimately beneficial. It’s all a matter of balance.
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If you aren’t interested in balance transfers, and are all for a quality low interest rate credit card from a leading Australian provider, see Commonwealth Bank’s Low Rate MasterCard for competitive 11.74% on purchases and a $48 annual fee.
Related posts:
- Cash Advance Interest Rates: Things you need to know
- Credit Card Interest Rates
- Ancillary Credit Card Fees & Misconceptions – Be On Guard
- How Do Foreign Service Fees Affect Use-Abroad Credit Cards?
- New to Credit Cards? A Guide to Interest Rates
- Credit Card Promotions
- Foreign Currency & International Fees for Credit Cards
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