Aussie credit cards customers could save hundreds of dollars a year under change to plastic rules

CREDIT card customers are about to reap the rewards of seeing as much as $300 back in their own pockets. This is how new card changes will impact you.

CREDIT card customers could save on average $300 a year under drastic new changes to the way interest is calculated.

Credit providers have been instructed to sharpen up their act following an overhaul of credit card rules this week.

One of the biggest changes is linked to the way customers are slugged monthly interest charges, which now means they will only be charged interest on the remaining balance at the end of the month.

Women shopping at a department store using a credit card. Picture: iStock.

Previously they were slugged for the full amount of debt racked up, regardless of how much they paid off that month.

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Analysis by financial comparison website RateCity estimated if someone put $4000 on their card and only paid $3000 (the average credit card debt) by the due date, they could save an estimated $26 in interest under the new rules.

Most cards charge interest rates around 20 per cent and calculations show this will save the typical customer about $312 per year.

RateCity spokeswoman Sally Tindall said, “It’s incredible to think that credit card companies have been allowed to charge interest on something you’ve already paid off.”

“This change has been a long time coming and will help people get back in the black.”

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Under the latest reforms the following will happen:

— The way credit card interest will be calculated will be simplified and means customers will reduce their monthly charges if their debt is not paid off in full (effective January 2019)

— Customers will no longer be able to received unsolicited offers or credit limit increases from providers (effective January 2019).

— Affordability assessments must be done on a consumer’s ability to repay the credit limit within a reasonable time (effective from July)

— Providers must give an online option for customers to close credit card accounts or reduce their limits (effective January 2019.)

Credit card customers will be able to save. Picture: Thinkstock

Crown Money Management’s chief executive officer Scott Parry said customers were finally being put back in control of their plastic debts.

“The saddest part is a lot of Australians don’t see the long-term impact of credit card interest and the true cost when interest is being added on to it,’’ he said.

“All these changes are putting the consumers back into a state where they have a lot more knowledge.

“Being able to close your account online is a total game changer ... there’s been absolute hoops to jump through to close your account.”

Previously customers had to phone up the lender to officially shut the account and this was often when the lender tried to talk them out of it.

Tribeca Financial’s chief executive officer Ryan Watson said the changes was a great result for plastic users.

Credit cards cand save you money. Picture: Thinkstock

“Banks have been gouging customers for way too long, any relief from exorbitant interest rates will be welcomed,’’ he said.

“Credit cards should only be used in an emergency and as such should have a maximum limit of $3,000 per person.”

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@sophieelsworth