Monday, November 22, 2010
Debt Free, Cashed Up and Laughing - The Cheapskates way to living the good life: Make a deal
Debt Free, Cashed Up and Laughing - The Cheapskates way to living the good life: Make a deal: "The age old art of haggling seems to have been lost in our day-to-day shopping. Somehow, somewhere we stopped asking for the best deal and i..."
Wednesday, October 27, 2010
Choice Shonkys put spotlight on rewards credit cards
By Mozo
Earlier this year we cracked the rewards code to reveal the value Australians were getting for their money with rewards credit cards with the launch of our Rewards Revealer tool. Today, consumer advocacy group, CHOICE, launched the 2010 CHOICE Shonkys, awarding the Commonwealth Bank Awards program a Shonky for low flying jest.
CHOICE singled out the Commonwealth Bank for its shonkiness in how the points are calculated for cards linked to the Qantas Frequent Flyer program. Unlike other rewards credit cards where one rewards point equals one Qantas Frequent Flyer Point, with the Commonwealth Bank card you only earn points at half the rate. It means you have to spend double the amount of money to earn the rewards.
The Shonkys, reminded us here at Mozo HQ of just how important the Rewards Revealer is, and so we decided to take this opportunity to take a look (and highlight) some other shoddy practices and unrewarding rewards programs.
Based on a $12,000 annual spend the three worst performing rewards cards are:
| Card | Annual rewards value minus fees |
| NAB Gold Card | -$90 |
| American Express Qantas American Express Premium Card | -$74 |
| Citibank Gold | -$56 |
(excluding platinum cards)
Rewarding? Maybe for the banks but certainly not us consumers.
With the NAB Gold Card to earn you a flight from Sydney to London you’d need to spend a mind blowing $937,500 and that’s not the biggest catch. Points expire after 36 months, so unless you are planning on buying a house on your credit card, it’s virtually impossible to accrue enough points to redeem the flight before they expire.
But even more telling is that it’s not just a handful of rewards credit cards that will put you in the red. Of the 71 standard rewards cards in the market, 35 will cost you more than they return in rewards value each year (at $12,000 annual spend after the annual fee).
So, what can you do to ensure you get value from your rewards card? Here are our top tips:
1. Make sure you are earning more in rewards than you are paying in annual fees.
2. Always pay off your card in full each month to avoid high interest rates.
3. If you have a credit card debt, switch to a low rate card instead.
Compare rewards credit cards at mozo.com.au
Sunday, October 24, 2010
JUMP IN SENIORS DECLARING BANKRUPTCY SAID MIND-BOGGLING - RECENT STUDY
23 October 2010
ReutersFor more and more seniors, retirement doesn’t mean a debt-free life of leisure. An increasing number of Americans aged 65 and older are declaring bankruptcy, according to a recent study by John Pottow, professor of law at the University of Michigan Law School.
Those aged 65 and older represented seven percent of bankruptcy filers in 2007, a mind-boggling jump from 1991. They are the “fastest-growing age demographic,” according to Pottow’s study.
What’s the culprit for so much debt? Credit cards. Two-thirds of Americans who filed for bankruptcy said credit cards were the key reason for their financial problems, according to Pottow’s research. Besides having more credit card debt compared with younger bankruptcy filers, 44.8 percent of those aged 65 and older also had more plastic in their wallets. “They’re using credit cards as a maladaptive coping mechanism,” Pottow says.
Stephanie Osterland, a supervisor in the bankruptcy department at GreenPath debt solutions, sees an increasing number of seniors living beyond their means. Says Osterland: “They’re just trying to live off of a fixed income, and that’s usually Social Security. Maybe they have a small pension. We find they’ve used credit cards to supplement that income and expenses or they just end up getting into a lot of medical debt.”
In addition to escalating medical expenses, seniors have seen their portfolios hit hard by the lagging stock market. Carolyn Rodi of Saving Your American Dream says those considering bankruptcy should see a credit counselor at a non-profit organization to get their finances in order.
Credit counselors, such as those at GreenPath, help the elderly deal with a stressful situation. “We try to help them focus on what it’s going to look like” after they get out of debt, Osterland says.
Rodi also recommends that potential bankruptcy filers seek out pro-bono legal aid. “There are a lot of elderly people that are being taken advantage of by bankruptcy attorneys and mortgage brokers who are advising them improperly to pay for the bankruptcy, take out a reverse mortgage or to do things that aren’t in their best interest,” she says. ”If you have no income, why should you borrow to pay someone when you can get free legal aid?”
What are the chances of a senior paying off his or her debts? It’s difficult to determine, especially because seniors tend to be on a fixed income. And while finding a job — such as a WalMart greeter — seems like a viable option, it is not necessarily feasible for all seniors to work.
In addition, whether or not a person declares Chapter 7 (which involves the liquidation of one’s assets) or Chapter 13 (which allows debt restructuring) bankruptcy can be a significant factor in determining what one’s lifestyle will be. “If you have to file for Chapter 7 bankruptcy, you may be able to find affordable housing that allows you to just get by,” says Rodi. “Chapter 13 lets you keep your house and doesn’t touch your retirement savings.”
Regardless, filing for bankruptcy is very stressful for anyone. “A lot of our clients in that post-retirement age have a hard time coming to grips with their situation,” Osterland says. “It’s very emotional for them. We try to focus on the future and see if this debt can be lifted off their shoulders.”
Sunday, October 17, 2010
Bad banks outed on public list
- By HELEN POW
- From: The Sunday Telegraph
- October 17, 2010
THE worst banks and lenders will be publicly named and shamed by the Financial Ombudsman Service (FOS).
The financial institutions and banks with the most customer complaints for sloppy service, excessive charges or misleading information on products, will for the first time be placed on a public list.
The Ombudsman hopes that by outing the worst offenders, financial firms will improve their service.
"Consumers, the public and the media need to access this information to see who the problem banks are," Consumer Credit Legal Centre principal solicitor Katherine Lane said.
"This sort of reporting is essential otherwise we, the public, cannot scrutinise what is going on and it will just continue.
"We need to know who is worst so we can approach the failing financial institutions and the regulator and ask what is being done."
The FOS received 19,107 complaints in the 2008/09 financial year a 33 per cent spike compared with the previous 12 months.
There was a 33.5 per cent surge in complaints about consumer credit over the year the bulk of which involved home loans and credit cards from 4645 to 6202.
Consumer Credit Legal Centre deals with 16,000 banking complaints each year and another 1000 involving insurance companies.
The centre said it had seen a huge increase in complaints regarding mortgage hardship and repossessions, with National Australia Bank proving the worst offender.
GE Money was also up there in terms of complaints about its interest-free credit cards, which lawyer Katherine Lane said were causing people on low incomes "no end of trouble".
The Australian Bankers' Association chief executive Steven Munchenberg said: "The only reasonable way of doing this, if the FOS has to do it at all, would be to have the number of complaints by institution as a percentage of their total customers.
"Everything we have seen so far gives us real concern that the information will not be fair."
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M: 0434 52 44 66
www.facebook.com/pages/NoBankruptcy
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Wednesday, October 13, 2010
Mortgage delinquencies highest in Sydney and surrounding suburbs, new report warns
Wednesday, 13 October 2010 10:28
Patrick Stafford – Smart Company
The Fairfield-Liverpool region and outer suburbs of Sydney are among the worst areas in the country when it comes to mortgage delinquencies and investors should keep an eye on these areas, a new report from Moody's Investor Services reveals.
But the author of the report also says Australia has a relatively low amount of arrears compared to similar economies and urges investors to examine the details of each area and not take the results on face-value. The report points out some areas are over or under-represented when it comes to mortgage delinquencies.
"If you compare our economy to other economies, like the US, or Britain or Spain, you will see our delinquencies are doing quite well in comparison. However, what this report does is highlight the areas within the country that you should keep an eye on," author Arthur Karabatsos says.
The Fairfield-Liverpool region, which includes suburbs such as Fairfield, Liverpool and Casula, recorded a delinquency rate of 2.77%, while Outer South Western Sydney, including suburbs like Macquarie Fields and Campbelltown, recorded a 2.55% delinquency rate.
The report defines a delinquency as failing to make one or more mortgage payments, meaning they are over 30 days in arrears.
The top 10 worst areas were listed as:
· Fairfield-Liverpool (NSW)
· Outer South Western Sydney (NSW)
· North Western Sydney (NSW)
· Central Coast (NSW)
· Hunter (NSW)
· Canterbury-Bankstown (NSW)
· Lower Western WA (WA)
· Central West (NSW)
· Far West-North Western (NSW)
· Mid-North Coast (NSW)
The report also shows that North Western Sydney, including suburbs such as Penrith, Mt Druitt and Blacktown, account for 6.48% of all 30+ day delinquencies. It is the only region classified as "highly elevated" in terms of contributions to overall delinquencies.
Karabatsos says the report uses the "Moody's Mortgage Performance Indicator" to compare regions, and claims it to be a more accurate measure. He says if a region has an MMPI of over "1", then those region's delinquencies are over-represented compared to the overall country.
For instance. Liverpool-Fairfield represents 4.24% of all arrears in Australia – but the region only accounts for 2.05% of loans. Therefore, the region is given an MMP of 2.07, and is classified as over-represented. Karabatsos says investors should pay attention to this ranking as it will give a more accurate picture of the market.
"When people look at postcodes, they can't get a picture of what's going on. I've had comments from investors about these postcode-based lists, and they literally try and find road maps and figure out the proximity of one postcode to the other."
"But what this does is helps investors find where the problematic loans are. We have gone to this new regional approach because I, for instance, can pick up straight away that Sydney is where all the problem areas are."
Melbourne and Brisbane have recorded some of the strongest results in the country, with three of the top 10 best performing areas located in Melbourne.
One of the biggest factors in high delinquencies is higher LTVs, Karabatsos says. He claims that "without exception, borrowers who have missed at least one repayment have a higher LTV and loan balance than all other borrowers within the same region".
In the All Gippsland region in Victoria, borrowers have a weighted average LTV of 62.52% and an average loan balance of $133,776. However, those who are 30+ days delinquent have LTVs of 73.30% and loan amounts of $$152,667.
However, Karabatsos declined to comment on how these LTVs are affecting the wider-housing market, saying Moody's is conducting further research in that area. Overall, he says, the report should be issued as a warning for investors.
"Look at the results, and see where certain arrears are over-represented. There are some areas in Sydney that are performing very badly but you need to look at whether these areas ore over-represented or not, and what the index categorises them as in terms of their overall contribution to delinquency rates."
Dark side of the honeymoon
Dear john,
You have been sent this article link by charles courtesy of smh.com.au
Personal Message:
Dark side of the honeymoon
October 13, 2010 - 3:00AM
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Monday, October 4, 2010
Informal debt agreements outside of the Insolvency Act
A new breed of "debt-help'' competitor is springing up, especially online, with names like nobankruptcy.com.au and mybudget.com.au, as well as minor start-ups such as creditplanb.com.au.
These services specialise in helping people overloaded with debt set a budget, negotiate affordable repayment plans with creditors and manage repayments – for a fee.
They are effectively creating informal debt agreements outside of the Insolvency Act.
Their customers, the people overloaded with debt, are not left with a lifelong black mark against their credit profile but may be without rights.
Fox Symes has dominated the debthelp industry for almost 10 years with its daytime television marketing strategy and slogan: "One thing saved me, a phone call to Fox Symes.'
In the past two years, Fox Symes has helped thousands of consumers repay $55 million to their creditors through a debt agreement registered under Part IX of the Bankruptcy Act.
The company administered 51per cent of all debt agreements registered with the Federal Government's Insolvency and Trustee Service (ITSA).
Fox Symes charges, on average, $100 per month in fees to collect one big repayment from the debtor and distribute it to creditors, who accept an average total repayment of 76 cents in the dollar of the debt owed.
That is expensive but that service comes with rights, said Fox Symes director Deborah Southon. "There are a number of operations negotiating de facto debt agreements with creditors but there is nothing there to bind creditors to the agreement,'' Ms Southon said. "A debt agreement is binding on creditors as well and provides debtors with certainty.
"Some people criticise formal debt agreements but they bind creditors as well to a deal and give debtors rights and let debtors move on.''
The marketing of Part IX debt agreements as pseudo debt consolidation instruments has been consistently criticised by consumer advocates and financial counsellors for years but they consistently deliver for creditors who have largely come to support them post-2007 reforms.
Nobankruptcy.com.au's Christian Oey said anybody could negotiate with their creditor if they were persistent enough. "You have to be patient and persistent and try to get to a person with authority over the computer,'' he said. "That's what we do and it can take time but it works.
"It is easier for us to do it for people. We know how things work.'' Mr Oey is a critic of formal Part IX debt agreements.
"There is no reason why heavily indebted consumers should sign a debt agreement. They are an act of bankruptcy that stays with you forever,” he said.
"Sometimes we have to be persistent and patient but we generally get to talk to decision makers at the creditors and do a deal that doesn't involve a debt agreement - that is good for everyone.
"Often people don't understand what the full consequences of a debt agreement are.''
Ms Southon said consumers should be aware that informal or de facto debt agreements do not prevent creditors from taking action in the future. "Informal debt agreements are a problem,'' Ms Southon said.
"A similar trend is emerging in the United Kingdom.
"There are some notorious small operators in this area.''
Formal debt agreements face another challenge from the government.
Changes to bankruptcy laws will add an up-front government fee to formal debt agreements from October 1.
The fee is expected to be $200 - plus an ongoing trailing commission on repayments of 1 per cent, which will be payable to the Federal Government's ITSA.
The debt help industry is already under pressure, and not just from economic stimulus payments and low interest rates.
There are only 14 registered debt agreement administrators left in Queensland.
There are 36 in Australia.
"The new fee will be problematic,'' Ms Southon said. "I wouldn't be surprised if the fee meets a lot of consumer resistance.
"What is ITSA going to do if a debtor refuses to pay the fee or can't pay the fee?
"These people can't pay their bills now.''
These services specialise in helping people overloaded with debt set a budget, negotiate affordable repayment plans with creditors and manage repayments – for a fee.
They are effectively creating informal debt agreements outside of the Insolvency Act.
Their customers, the people overloaded with debt, are not left with a lifelong black mark against their credit profile but may be without rights.
Fox Symes has dominated the debthelp industry for almost 10 years with its daytime television marketing strategy and slogan: "One thing saved me, a phone call to Fox Symes.'
In the past two years, Fox Symes has helped thousands of consumers repay $55 million to their creditors through a debt agreement registered under Part IX of the Bankruptcy Act.
The company administered 51per cent of all debt agreements registered with the Federal Government's Insolvency and Trustee Service (ITSA).
Fox Symes charges, on average, $100 per month in fees to collect one big repayment from the debtor and distribute it to creditors, who accept an average total repayment of 76 cents in the dollar of the debt owed.
That is expensive but that service comes with rights, said Fox Symes director Deborah Southon. "There are a number of operations negotiating de facto debt agreements with creditors but there is nothing there to bind creditors to the agreement,'' Ms Southon said. "A debt agreement is binding on creditors as well and provides debtors with certainty.
"Some people criticise formal debt agreements but they bind creditors as well to a deal and give debtors rights and let debtors move on.''
The marketing of Part IX debt agreements as pseudo debt consolidation instruments has been consistently criticised by consumer advocates and financial counsellors for years but they consistently deliver for creditors who have largely come to support them post-2007 reforms.
Nobankruptcy.com.au's Christian Oey said anybody could negotiate with their creditor if they were persistent enough. "You have to be patient and persistent and try to get to a person with authority over the computer,'' he said. "That's what we do and it can take time but it works.
"It is easier for us to do it for people. We know how things work.'' Mr Oey is a critic of formal Part IX debt agreements.
"There is no reason why heavily indebted consumers should sign a debt agreement. They are an act of bankruptcy that stays with you forever,” he said.
"Sometimes we have to be persistent and patient but we generally get to talk to decision makers at the creditors and do a deal that doesn't involve a debt agreement - that is good for everyone.
"Often people don't understand what the full consequences of a debt agreement are.''
Ms Southon said consumers should be aware that informal or de facto debt agreements do not prevent creditors from taking action in the future. "Informal debt agreements are a problem,'' Ms Southon said.
"A similar trend is emerging in the United Kingdom.
"There are some notorious small operators in this area.''
Formal debt agreements face another challenge from the government.
Changes to bankruptcy laws will add an up-front government fee to formal debt agreements from October 1.
The fee is expected to be $200 - plus an ongoing trailing commission on repayments of 1 per cent, which will be payable to the Federal Government's ITSA.
The debt help industry is already under pressure, and not just from economic stimulus payments and low interest rates.
There are only 14 registered debt agreement administrators left in Queensland.
There are 36 in Australia.
"The new fee will be problematic,'' Ms Southon said. "I wouldn't be surprised if the fee meets a lot of consumer resistance.
"What is ITSA going to do if a debtor refuses to pay the fee or can't pay the fee?
"These people can't pay their bills now.''
Thursday, September 23, 2010
Credit Card Interest – the Ignored Rate-Rise Impact
Interest rates are set to rise again next month in a “double-whammy” for low-income families struggling with rising mortgage and credit card repayments.
“This latest interest rate rise will have a devastating impact on credit card holders, already struggling to pay back their debts compounded by punishing interest, as well as their mortgages.” says Christian Oey, CEO of NoBankruptcy.com.au.
“The focus at this time each month is on the impact on the home market and mortgage repayments, but what about the 15-20% rates being paid by credit card holders? They’ll increase again too.”
“We’re seeing more and more credit card debt repayments crippling families, rending apart peoples’ lives and forcing more people into bankruptcy,” said Mr Oey.
NoBankruptcy.com.au is a company specialising in Informal Debt Agreements, negotiating directly with creditors on their clients’ behalf.
“NoBankruptcy is a specialist team of debt negotiators, helping clients become financially sound once more, through direct debt management. We genuinely want to help people get back on their feet.” said Mr Oey.
Many factors can lead to people who were once financially sound becoming unable to meet their commitments. Job loss, illness, divorce and family issues can all have the effect of people taking their eye off their finances, allowing them to fall into disrepair.
“This latest interest rate rise will have a devastating impact on credit card holders, already struggling to pay back their debts compounded by punishing interest, as well as their mortgages.” says Christian Oey, CEO of NoBankruptcy.com.au.
“The focus at this time each month is on the impact on the home market and mortgage repayments, but what about the 15-20% rates being paid by credit card holders? They’ll increase again too.”
“We’re seeing more and more credit card debt repayments crippling families, rending apart peoples’ lives and forcing more people into bankruptcy,” said Mr Oey.
NoBankruptcy.com.au is a company specialising in Informal Debt Agreements, negotiating directly with creditors on their clients’ behalf.
“NoBankruptcy is a specialist team of debt negotiators, helping clients become financially sound once more, through direct debt management. We genuinely want to help people get back on their feet.” said Mr Oey.
Many factors can lead to people who were once financially sound becoming unable to meet their commitments. Job loss, illness, divorce and family issues can all have the effect of people taking their eye off their finances, allowing them to fall into disrepair.
Wednesday, September 8, 2010
Big banks eye independent rate rises
Big banks eye political environment to gauge risks of independent rate rises, says analyst Scott Murdoch
From: The Australian September 08, 2010
THE big Australian banks are forecast to independently lift key mortgage rates, to take advantage of the current political environment.
An analysis by Credit Suisse has found the major banks could raise their rates by up to 20 basis points, outside of the official cycle with the Reserve Bank of Australia.
A move of that size would ease the current pressure from higher funding costs but also increase the banks net interest margins, a key barometer of profitability.
The Commonwealth Bank of Australia has been named as the first bank likely to move because it has the highest level of share of the Australian residential mortgage market.
The bank, which is Australia's largest by market capitalisation, has a 26 per cent home loan market share compared to Westpac’s 24.3 per cent, National Australia Bank’s 13.1 per cent and ANZ’s 12.9 per cent.
Credit Suisse analyst Jarrod Martin said it was increasingly likely the banks would move out of sync with the RBA, given the current political climate.
"The political risks are clearer," he said.
"With a minority federal government now being formed by Labor, the major banks can now better assess the political risks associated with undertaking an out of cycle mortgage rate increase.
"We believe it's a prospect given the apparent funding cost and net interest margin pressures currently affecting bank core earnings growth."
Mr Martin said an increase, of up to 20 basis points, would reflect the constant pressure on the banks earnings due to higher funding costs.
The major four banks have to raise more than $100 billion over the next year to fund their current and future mortgages.
"This should be viewed as a glass half empty issue," he said.
"While such a development would be a positive incremental development for bank earnings it should be seen as defensive in nature and highlights the core earnings pressure in the industry.
"It helps compensate for the number pressures on bank core earnings but it does not increase the sustainable earnings power of the sector."
Still, a price leader needs to step forward. In the past, Westpac and the NAB have taken the lead and raised outside of the RBA but have faced intense political criticism and scrutiny.
Westpac currently has the highest standard variable rate of 7.51 per cent, compared to ANZ's 7.41 per cent, CBA's 7.36 per cent and NAB's 7.24 per cent.
"A price leader needs to emerge," Mr Martin said.
"We see CBA as the most natural price leader that needs to emerge to allow industry-wide mortgage rate increases to be effected," he said.
The analysis found that if mortgage rates were hiked by 20 basis points, each of the banks would experience an increase in their net interest margin.
CBA's net interest margin would move from 2.04 per cent to 2.13 per cent while Westpac’s would lift from 2.27 to 2.37 per cent.
The impact at the banks with smaller mortgage books would be less significant. ANZ’s margin would rise from 2.42 per cent to 2.49 per cent and NAB from 2.25 per cent to 2.31 per cent.
From: The Australian September 08, 2010
THE big Australian banks are forecast to independently lift key mortgage rates, to take advantage of the current political environment.
An analysis by Credit Suisse has found the major banks could raise their rates by up to 20 basis points, outside of the official cycle with the Reserve Bank of Australia.
A move of that size would ease the current pressure from higher funding costs but also increase the banks net interest margins, a key barometer of profitability.
The Commonwealth Bank of Australia has been named as the first bank likely to move because it has the highest level of share of the Australian residential mortgage market.
The bank, which is Australia's largest by market capitalisation, has a 26 per cent home loan market share compared to Westpac’s 24.3 per cent, National Australia Bank’s 13.1 per cent and ANZ’s 12.9 per cent.
Credit Suisse analyst Jarrod Martin said it was increasingly likely the banks would move out of sync with the RBA, given the current political climate.
"The political risks are clearer," he said.
"With a minority federal government now being formed by Labor, the major banks can now better assess the political risks associated with undertaking an out of cycle mortgage rate increase.
"We believe it's a prospect given the apparent funding cost and net interest margin pressures currently affecting bank core earnings growth."
Mr Martin said an increase, of up to 20 basis points, would reflect the constant pressure on the banks earnings due to higher funding costs.
The major four banks have to raise more than $100 billion over the next year to fund their current and future mortgages.
"This should be viewed as a glass half empty issue," he said.
"While such a development would be a positive incremental development for bank earnings it should be seen as defensive in nature and highlights the core earnings pressure in the industry.
"It helps compensate for the number pressures on bank core earnings but it does not increase the sustainable earnings power of the sector."
Still, a price leader needs to step forward. In the past, Westpac and the NAB have taken the lead and raised outside of the RBA but have faced intense political criticism and scrutiny.
Westpac currently has the highest standard variable rate of 7.51 per cent, compared to ANZ's 7.41 per cent, CBA's 7.36 per cent and NAB's 7.24 per cent.
"A price leader needs to emerge," Mr Martin said.
"We see CBA as the most natural price leader that needs to emerge to allow industry-wide mortgage rate increases to be effected," he said.
The analysis found that if mortgage rates were hiked by 20 basis points, each of the banks would experience an increase in their net interest margin.
CBA's net interest margin would move from 2.04 per cent to 2.13 per cent while Westpac’s would lift from 2.27 to 2.37 per cent.
The impact at the banks with smaller mortgage books would be less significant. ANZ’s margin would rise from 2.42 per cent to 2.49 per cent and NAB from 2.25 per cent to 2.31 per cent.
Friday, September 3, 2010
Blog-smacked!: Poker machines = STUPIDITY TAX
Blog-smacked!: Poker machines = STUPIDITY TAX: "All this talk about poker machines reminds me of an old saying I like: Poker machines are just another STUPIDITY TAX!"
Poker machines = STUPIDITY TAX
All this talk about poker machines reminds me of an old saying I like:
Poker machines are just another STUPIDITY TAX!
Poker machines are just another STUPIDITY TAX!
Thursday, September 2, 2010
0% balance transfers debunked
By Hamish at http://www.mozo.com.au/
As winter dies and the stress of losing weight for summer sets in, spare a thought for credit cards that have gorged for months and are entirely unfit for the christmas binge. Now’s the time to think about a balance transfer.
Since you’re a clever sort, you’ll be ogling those super-slim interest rates on Mozo’s credit card comparison page — and hey, who hasn’t snuck a glance at a lusty 0% balance transfer rate? But here’s the rub: that low interest rate could end up costing you money.
“Zounds,” you might reply, and return to your ogling, but bear with us. We’ve been having a bit of a play with our nifty credit card calculator, which spits out the actual cost of a credit card — in place of all this interest rate and balance transfer malarky. The cost is the total you’ll pay in interest and fees to kill off that debt, and as it happens, it’s the best way to judge a credit card.
So let’s peek beneath the balance transfer covers.
•Citibank’s Clear Card, for example, offers a 0% for 6 months on balance transfers — and a stupendous purchase rate of 11.99% for 12 months. However, if you don’t pay off the transfer within that time, the balance reverts to a corpulent 21.24%.
For a debt of $3000, with repayments of $200 monthly, you’re looking at a cost of $308 in fees and interest.
•Suncorp’s Clear Options Standard credit card, by contrast, offers 1.9% for 12 months, and then 17.99% on the outstanding balance transferred. Punch in the same numbers, and the cost of knocking off that same debt is only $135.
The difference is, well, clear.
•St George’s Vertigo credit card has a lousier balance transfer offer still, at 2.99% for 6 months. However, after 6 months any unpaid balance doesn’t revert to a sky-high cash rate, but to a quite lovely purchase rate of 12.49%.
So what does that all mean? The same debt, with the same repayments, will cost $252 to pay off with St George.
And if, ahem, your repayments drop to only $100 each month, while that debt blows out to $5000, here’s the cost of each balance transfer in fees and interest:
Citibank Clear Card: $4639
SunCorp Clear Options Standard: $2304
St George Vertigo: $1974
The conclusion? Pay of that balance ASAP! But if that isn’t feasible, don’t just grab the best headline rate: it could be twice as expensive.
As winter dies and the stress of losing weight for summer sets in, spare a thought for credit cards that have gorged for months and are entirely unfit for the christmas binge. Now’s the time to think about a balance transfer.
Since you’re a clever sort, you’ll be ogling those super-slim interest rates on Mozo’s credit card comparison page — and hey, who hasn’t snuck a glance at a lusty 0% balance transfer rate? But here’s the rub: that low interest rate could end up costing you money.
“Zounds,” you might reply, and return to your ogling, but bear with us. We’ve been having a bit of a play with our nifty credit card calculator, which spits out the actual cost of a credit card — in place of all this interest rate and balance transfer malarky. The cost is the total you’ll pay in interest and fees to kill off that debt, and as it happens, it’s the best way to judge a credit card.
So let’s peek beneath the balance transfer covers.
•Citibank’s Clear Card, for example, offers a 0% for 6 months on balance transfers — and a stupendous purchase rate of 11.99% for 12 months. However, if you don’t pay off the transfer within that time, the balance reverts to a corpulent 21.24%.
For a debt of $3000, with repayments of $200 monthly, you’re looking at a cost of $308 in fees and interest.
•Suncorp’s Clear Options Standard credit card, by contrast, offers 1.9% for 12 months, and then 17.99% on the outstanding balance transferred. Punch in the same numbers, and the cost of knocking off that same debt is only $135.
The difference is, well, clear.
•St George’s Vertigo credit card has a lousier balance transfer offer still, at 2.99% for 6 months. However, after 6 months any unpaid balance doesn’t revert to a sky-high cash rate, but to a quite lovely purchase rate of 12.49%.
So what does that all mean? The same debt, with the same repayments, will cost $252 to pay off with St George.
And if, ahem, your repayments drop to only $100 each month, while that debt blows out to $5000, here’s the cost of each balance transfer in fees and interest:
Citibank Clear Card: $4639
SunCorp Clear Options Standard: $2304
St George Vertigo: $1974
The conclusion? Pay of that balance ASAP! But if that isn’t feasible, don’t just grab the best headline rate: it could be twice as expensive.
Tuesday, August 31, 2010
A Mixed Week of New Clients
Its been a mixed week of various new clients. From the older couple who owe the ATO over $100,000 to the young divorcee who has about $60k in unsecured debts, and also a chartered accountant who lost money trading shares and options... our new clients come from all walks of life and all states.
We have also been talking to a married couple that tried to apply for a Part IX, but we're badly advised and their application was rejected because it wasn't completed correctly. A shame, but really also a blessing for them, in that they can avoid some of the prohibitive issues that Part IX's bring.
The one element they all have in common though, is they need professional help, and seeking that help is the
first smart step in their recovery process. They're on the way to getting their lives back, debt-free and cashed-up, and never to look at credit cards the same way again!
I'm looking forward to helping more people next week. I wonder what sort of life-stories they'll have?
We have also been talking to a married couple that tried to apply for a Part IX, but we're badly advised and their application was rejected because it wasn't completed correctly. A shame, but really also a blessing for them, in that they can avoid some of the prohibitive issues that Part IX's bring.
The one element they all have in common though, is they need professional help, and seeking that help is the
first smart step in their recovery process. They're on the way to getting their lives back, debt-free and cashed-up, and never to look at credit cards the same way again!
I'm looking forward to helping more people next week. I wonder what sort of life-stories they'll have?
Friday, August 27, 2010
Debt Free, Cashed Up and Laughing - The Cheapskates way to living the good life: Double check
Debt Free, Cashed Up and Laughing - The Cheapskates way to living the good life: Double check: "If you were to check your grocery or department store receipts regularly, chances are you will eventually find an overcharge. This happens..."
Thursday, August 26, 2010
Solving Credit Card Debt Issues
Well it’s been a big week, saw two people in Melbourne and they have signed up to our unique debt negotiation service. One of them has 5 kids, and his income has just dropped by two-thirds!!
Help!
He is really struggling, and has over $100k of ATO debt on top of the $50k of credit card debts too.
Other strugglers spoken to this week include people who can’t re-finance their home to get some cash because they had a default already, and the banks don’t want to know about them, full-stop. We have a solution for that situation as well.
It all just takes some time, planning and then sticking to the game-plan and once you come out the other side you’re debt-free.
Wouldn’t that be great?!?
Friday, August 20, 2010
ANZ wipes pensioner's $18,600 credit card debt
19/08/2010
By ninemsn Money staff
The ANZ has agreed to wipe $18,600 in debt from a Victorian pensioner's credit card after steadily increasing his limit over the past nine years.
Alec Stubbs, a former wharfie from Yarawonga, has had his ANZ credit card limit increased to $46,000 since 1991.
"It's clear this customer's credit limit should not have been increased to this extent, and due to the exceptional circumstances we have decided to clear this debt to ensure his family is not placed under any additional stress at this time," ANZ spokesperson Stephen Ries told the Herald Sun.
Stubbs, 72, has been on a pension for several years and receives $485 a fortnight.
He also had a credit card with the Commonwealth Bank with the limit steadily climbed from $3,500 in 2003 to $25,000 in 2006.
CBA spokesperson Steve Batten said the bank had stopped unsolicited offers to welfare recipients from 2007, and those who requested extra credit had to pass a financial test according to the Herald Sun.
Stubbs’ wife Pauline only discovered that her husband was $36,000 in debt when she opened his mail while he was in hospital being treated for cancer.
"I nearly died," she said. "How in the hell could they think a pensioner could really afford this? We are not secret millionaires.
"Even if he asked for this, don't they check into people's circumstances before they throw money around?"
The husband and wife have kept separate banks accounts throughout their 53-year marriage and she wasn't aware of the minimum monthly payments running into hundreds of dollars.
His deteriorating health and confusion has left him unable to properly explain his finances according to the Herald Sun.
In August the federal government promised new measures that would mean credit card companies would not be allowed to increase credit limits without agreement from customers .
Wednesday, August 11, 2010
Good, bad and diabolical
Good, bad and diabolical
August 8, 2010 - SMH
There are different kinds of debt — but if you have the Very Bloody Bad variety, get rid of it.
YOU'VE probably heard about good debt and bad debt. Well, they should rightfully be called All Right Debt and Very Bloody Bad Debt.
The former is usually over assets that generate income and so earn tax deductions. It's "all right" because it potentially builds your wealth. VBBD, by contrast, actually drains your wealth potential.
Advertisement: Story continues belowWe're talking credit cards and personal loans. And yes, even your mortgage - although I'll get to why this is a special category.
With rates up - and probably headed higher yet - it's time to attack VBBD before it eats further into your future prosperity.
Credit cards and personal loans are the worst kind because they have the highest interest rates and are used for depreciating assets - in other words, those that will lose value over time. Or they are for experiences for which you'll have nothing to show afterwards, such as holidays.
Credit cards are priority No. 1. Not only are the rates typically the heftiest but the repayments also are often set so low you'll never pay them off.
A debt of $2000 on a card with a 17.65 per cent rate, a $59 annual fee that you add to the outstanding balance and a 1.5 per cent minimum repayment will in 25 years leave you with a debt of not $2000 but $3242. And you'll have paid almost $12,000 in interest.
Cannex calculates you'll still have debt in 25 years on cards with more than 16 per cent interest, a $24 annual fee and a minimum repayment of 2 per cent or less. This won't happen with a personal loan - repayments are set so you'll clear it in the agreed time. Such discipline can make them a better alternative.
The best way to eradicate credit card debt is to transfer your balance to a card that charges low or no interest for an introductory period and move heaven and earth to knock it off in that time. Don't use the card for any new spending - this is how the banks recoup their apparent generosity. Fresh debt will attract a high interest rate from day one and until you've cleared your entire transferred balance.
So what makes mortgages special VBBD? The fact they are over an asset, which is hopefully appreciating, so with any luck you'll end up paying out less by the end than your property is by then worth.
What's more, as with personal loans, the repayment schedule makes them a form of forced saving that can be a positive.
With - usually - lower rates than credit cards or personal loans, your home loan is the third debt to which you should turn your attention.
But remember that, as probably your biggest debt, your potential savings from early repayment are massive. Pay $100 extra a month on a $250,000, 25-year mortgage at 8 per cent and you'll save $53,000 (and more than three years); manage $500 and it jumps to $155,000 (and more than 10 years).
Beyond simply finding the cash, try these canny strategies.
Trick yourself into it by paying half your monthly repayments fortnightly. It sounds bizarre but because there are 12 months in a year but 26 rather than 24 fortnights, over the year you will make a whole extra - relatively painless - repayment.
Use every dollar twice by keeping and making savings into an offset account attached to the mortgage, so they are netted off your debt. You will save more in mortgage interest than you would make in a deposit account. And the fact that these are only "effective", rather than actual, earnings will mean no tax.
Get the bank to help by switching to a better deal. Even 0.5 percentage points will make a huge difference.
Use the rate rises as your incentive to bust out of debt far faster and a chunk cheaper.
August 8, 2010 - SMH
There are different kinds of debt — but if you have the Very Bloody Bad variety, get rid of it.
YOU'VE probably heard about good debt and bad debt. Well, they should rightfully be called All Right Debt and Very Bloody Bad Debt.
The former is usually over assets that generate income and so earn tax deductions. It's "all right" because it potentially builds your wealth. VBBD, by contrast, actually drains your wealth potential.
Advertisement: Story continues belowWe're talking credit cards and personal loans. And yes, even your mortgage - although I'll get to why this is a special category.
With rates up - and probably headed higher yet - it's time to attack VBBD before it eats further into your future prosperity.
Credit cards and personal loans are the worst kind because they have the highest interest rates and are used for depreciating assets - in other words, those that will lose value over time. Or they are for experiences for which you'll have nothing to show afterwards, such as holidays.
Credit cards are priority No. 1. Not only are the rates typically the heftiest but the repayments also are often set so low you'll never pay them off.
A debt of $2000 on a card with a 17.65 per cent rate, a $59 annual fee that you add to the outstanding balance and a 1.5 per cent minimum repayment will in 25 years leave you with a debt of not $2000 but $3242. And you'll have paid almost $12,000 in interest.
Cannex calculates you'll still have debt in 25 years on cards with more than 16 per cent interest, a $24 annual fee and a minimum repayment of 2 per cent or less. This won't happen with a personal loan - repayments are set so you'll clear it in the agreed time. Such discipline can make them a better alternative.
The best way to eradicate credit card debt is to transfer your balance to a card that charges low or no interest for an introductory period and move heaven and earth to knock it off in that time. Don't use the card for any new spending - this is how the banks recoup their apparent generosity. Fresh debt will attract a high interest rate from day one and until you've cleared your entire transferred balance.
So what makes mortgages special VBBD? The fact they are over an asset, which is hopefully appreciating, so with any luck you'll end up paying out less by the end than your property is by then worth.
What's more, as with personal loans, the repayment schedule makes them a form of forced saving that can be a positive.
With - usually - lower rates than credit cards or personal loans, your home loan is the third debt to which you should turn your attention.
But remember that, as probably your biggest debt, your potential savings from early repayment are massive. Pay $100 extra a month on a $250,000, 25-year mortgage at 8 per cent and you'll save $53,000 (and more than three years); manage $500 and it jumps to $155,000 (and more than 10 years).
Beyond simply finding the cash, try these canny strategies.
Trick yourself into it by paying half your monthly repayments fortnightly. It sounds bizarre but because there are 12 months in a year but 26 rather than 24 fortnights, over the year you will make a whole extra - relatively painless - repayment.
Use every dollar twice by keeping and making savings into an offset account attached to the mortgage, so they are netted off your debt. You will save more in mortgage interest than you would make in a deposit account. And the fact that these are only "effective", rather than actual, earnings will mean no tax.
Get the bank to help by switching to a better deal. Even 0.5 percentage points will make a huge difference.
Use the rate rises as your incentive to bust out of debt far faster and a chunk cheaper.
Friday, August 6, 2010
ANZ wins damages from former employee
| 06 August 2010 – from Banking Day |
ANZ National has won a ruling from the Employment Relations Authority for NZ$1.28 million recoverable from a former employee who caused losses to the bank by approving inflated mortgages as part of an elaborate scheme.
The employee, Zamir Hussein, worked as a mobile mortgage manager and was found liable for losses incurred by the bank in respect of 18 transactions where he recommended unconditional approval of mortgage applications. The borrowers then defaulted on those loans and their activities were referred to the Serious Fraud Office.
While ANZ’s actual damages exceeded NZ$1.28 million it decided to cap the claim at this amount based on the value of excess for which it would be liable under an insurance policy for such a loss.
In January this year, Hussein was ordered to pay NZ$54,000 and the current amount is in addition to that. The bank provided evidence on seven of the 18 transactions with three borrowers which resulted in a total loss of NZ$1.67 million to the bank. The loss resulted from the difference in the mortgage amount and the actual amount realised by the bank from mortgagee sales, plus costs related to the sales.
Wednesday, August 4, 2010
So many people are in debt-double-trouble.
Despite the looming federal election perhaps keeping some people at bay, it’s been another busy week, and we’re seeing the effects of some regional radio advertising trickle through in the form of fresh enquiries about our unique service.
So many people out there need our help, but many simply don’t know how to find us. Again this week we’ve had calls from people all over Australia looking for help out of their financial mess. Specifically we’ve had calls from all works of life: housewives in Sydney; business owners on the Gold Coast; and a young father in Adelaide (and his dad in Perth – just checking up on us).
Currently most calls for debt-relief help are from Western Sydney though, due to the ads we’re trialling on 2KA Country Music radio, and interestingly we’ve yet again proven the old radio adage that you need to be on-air over the long term to really generate a response. For the first few weeks we had no calls and though we had wasted our time and money, but that seems to be turning around now.
Many of the people I talk to have the same issues. They thought that debt problems wouldn’t happen to them, that they would be different and that they could avoid the interest rat-trap... but it’s the same for everyone, debt is a disaster!
And borrowing more money to pay off debts is double-trouble! I see it every day. People get a consolidation loan, only to re-use their freshly zero-balance credit card instead of ripping it up, and before they know it there’s another ten or twenty thousand dollars added to their inescapable debt burden.
So many of the people we talk to are now buried under debt, they can’t remember the original purpose of working. It reminds me of the old line: “You should work to live, not live to work.” Meaning there is more to life than working yourself to the bone to be able to pay your debts and cover your family’s living expenses.
It really gives you food for thought!
Wednesday, July 28, 2010
WOW!: Credit Card Debt overtakes Mortgage Debt
from: smh.com.au
Household savings improved in the June quarter, but credit cards overtook mortgages as the main form of debt in a survey of Australian households for the first time in almost four years.
The Melbourne Institute household financial conditions index rose 17.2 per cent to 33.7 in June, up from 28.8 in March.
“Credit card debt overtook mortgage debt as the main form of household debt in June, 36.6 per cent compared to 33.9 per cent,” Melbourne Institute research fellow Dr Edda Claus said in a statement.
“This is the first time since November 2006 that households nominate credit card, and not mortgage debt, as their main form of debt.”
The proportion of respondents nominating saving for a “rainy day” as their prime motivation for saving was 51.5 per cent, roughly unchanged from March, the survey found.
It also showed the proportion of respondents nominating holiday or travel as their motivation for saving was 55.8 per cent, up from 55.0 per cent in March.
The proportion of Australians saving grew marginally.
“About 48.8 per cent of Australian households saved part of their income in June 2010, up from 46.2 per cent in March,” the report said.
The June survey revealed three quarters of Australian households fully own their own home or have a mortgage, falling from 79.8 per cent in March and 78.8 per cent a year ago.
Just over 30.5 per cent of households said they would put new savings into deposit-taking institutions, while bank deposits remained the most popular form of savings.
More than 40 per cent of households said they were debt free, while a third said they held mortgage debt, down almost four per cent since last quarter.
There was virtually no quarterly improvement in the proportion of after-tax income used to repay debt, with almost 60 per cent of households indicating they use less than 10 cents in every dollar.
Meanwhile, people in Queensland were more likely to run into debt than those in other states, while NSW and Victorian residents were more likely to save than their counterparts in other states.
The average standard variable rate for mortgages offered by the big four banks is 7.38 per cent, according to RateCity.com.au, while the average low-rate credit card is 13.24 per cent. The average rate on a standard credit card is 19.6 per cent, the rate group said.
While the survey found credit card debt is the main form of debt for many Australians, the total outstanding mortgage debt remains larger by far. According to Reserve Bank data, mortgage debt totalled about $1.1 trillion in April, while other personal debt, which includes credit cards, tallied only about $141 billion.
Thursday, July 22, 2010
Retiree debt is soaring (The Sunday Telegraph (Sydney), 18 Jul 2010, Page 29)
Retiree debt is soaringBy NICK GARDNER
The Sunday Telegraph (Sydney)
18 Jul 2010
RECORD numbers of retirees are being forced to withdraw the equity in their homes to pay off spiralling debts. Financial counsellors and brokers of reverse mortgages have reported a surge in the number of elderly borrowers refinancing their homes to...read more...
Saturday, July 3, 2010
It Couldn't Be Done - by Edgar Guest
Somebody said that it couldn't be done,
But he with a chuckle replied
That "maybe it couldn't," but he would be one
Who wouldn't say so till he'd tried.
So he buckled right in with the trace of a grin
On his face. If he worried he hid it.
He started to sing as he tackled the thing
That couldn't be done, and he did it.
Somebody scoffed: "Oh, you'll never do that;
At least no one ever has done it";
But he took off his coat and he took off his hat,
And the first thing we knew he'd begun it.
With a lift of his chin and a bit of a grin,
Without any doubting or quiddit,
He started to sing as he tackled the thing
That couldn't be done, and he did it.
There are thousands to tell you it cannot be done,
There are thousands to prophesy failure;
There are thousands to point out to you, one by one,
The dangers that wait to assail you.
But just buckle in with a bit of a grin,
Just take off your coat and go to it;
Just start to sing as you tackle the thing
That "cannot be done," and you'll do it.
Friday, July 2, 2010
Thursday, July 1, 2010
The Business of Credit Cards - Part I
Anyone familiar with online affiliate marketing knows that credit card programs offer some of the more lucrative payouts for signing up new users; with some companies offering $30 for a completed application or $160 for a new signup, it is readily apparent that these companies really value new customers. Next, factor in credit card rewards programs; we as consumers love them, since we’re essentially getting paid to spend money using a card from bank XYZ! With all the money that these institutions are throwing at us, how do these companies stay in the black?
How do credit cards end up being a profitable business for the issuers?
Monetization Strategy #1: Annual Fees
Perhaps the most transparent and obvious monetization strategy is the annual fee. It’s worth noting that not all credit cards have an annual fee associated with using them. Those that are most likely to have such a fee attached to them are charge cards from American Express and those credit cards which are marketed to those with poor or flat-out bad credit. Annual fees can range anywhere from $15 per year to thousands of dollars per year, as is the case with the black card from AMEX. For many cardholders that don’t use their card very frequently, the annual fee more than pays for the total costs attached to maintaining that individual’s account, as there simply isn’t that much to do in order to do so! For the more prodigious users of plastic, the annual fee only covers part of the costs for that consumer’s use of credit, and must be combined with one of the other two monetization strategies to yield profits.
Monetization Strategy #2: Transaction Fees
The “bread and butter” of ethically palatable credit card revenues is found in the transaction fees. Did you know that credit cards make the issuer a little bit of money each time they are used? As consumers, we don’t often see this cost, but merchants are very familiar with it. Essentially whenever you use your credit card to make a purchase, the merchant accepting the card pays a percentage or fixed amount (depending on the processing gateway and other factors) of the sale to the company whose card you are using. These tiny amounts of money can really add up over time, and is the price which merchants pay to have access to the convenience of accepting credit cards. This is why when you go to smaller service stations you will occasionally see signs that state credit cards aren’t accepted for purchases amounting to $X or less, or that an additional fee is assessed to credit card transactions of $Y or less. If the business doesn’t put such measures in place, they actually stand to lose money from such transactions!
Next time we’re going to take a look at what is often considered the most nefarious monetization strategy; finance charges. We’ll take a look at some specific examples to see how much the credit card company really makes from someone’s financial desperation or irresponsibility.
Wednesday, June 30, 2010
Cutting credit is no easy snip
JOHN KAVANAGH – SMH - June 30, 2010
There is no quick fix to slashing your credit card debt.
With credit card rates of more than 20 per cent becoming commonplace, people who accumulate credit balances on their card accounts are facing very high repayment costs. A consumer who falls into the trap of paying only the minimum monthly repayment could take almost six years to pay off the balance and would end up paying interest of almost the same amount as the principal owed.
Credit card issuers have been moving their interest rates up in significantly steep steps this year.
In April, Citibank increased the purchase rate on its credit card by 0.6 of a percentage point to 15.59 per cent, and a number of issuers, including National Australia Bank, Suncorp, Macquarie, Aussie and Heritage Building Society, put their purchase rates up by 0.5 of a point.
The trend has continued since then. In May, Suncorp put up the purchase rate on Clear Option card by 0.5 of a point, the Woolworths Everyday Money card went up by the same amount and Westpac's 55 Day card went up 0.3 of a point. And in the latest round of changes, American Express increased the purchase rate on seven credit cards by 0.5 of a point to 20.49 per cent.
Infochoice has calculated the time it would take to repay a $10,000 balance on a high-rate card (see table). Using a rate of 20.71 per cent (the average of the five cards with the highest rates in the market) and making a minimum repayment of 2.5 per cent (or $250 a month on the $10,000 balance), the cardholder would take five years and nine months to pay off the balance and would pay total interest of $7126.
If the cardholder pays an extra $100 a month, the time needed to repay the balance would fall to three years and five months and the total interest cost would be $3898.
One of the myths of the credit card market is that only a minority of cardholders carry a balance on their cards from one month to the next. In fact the opposite is true. According to Reserve Bank credit card figures, the ''revolve rate'' on cards is 72.5 per cent. Revolve rate is the finance industry term for cards that carry a credit balance from month to month.
So almost three-quarters of credit card users are paying interest on their credit balances.
Consumers spent an average of $15,963 on their credit cards in the year to April and carried an average account balance of $3234. Spending on cards increased by a fairly modest 3.3 per cent over that 12-month period but balances increased by 6.9 per cent, which means we are reining in our spending on cards but accumulating more debt.
Credit card issuers specify a minimum monthly payment, which they express in percentage terms. It ranges from 2 per cent to 3 per cent. As the example above shows, one of the biggest debt traps to fall into is paying only the minimum amount.
''Customers should always pay more than the minimum repayment each month as even a small amount extra can make a big difference over time,'' says a financial services analyst at Infochoice, David Lalich.
Another trap is continuing to use a card with a high interest rate when you carry a credit balance.
People like the idea of rewards and don't realise that in most cases the interest they pay on their credit balance negates any benefit they might receive from rewards.
Rewards cards with high rates are designed for ''transactors'' (people who pay their account in full each month). With rates now above 20 per cent, ''revolvers'' should be looking to switch to a low-rate card.
Infochoice has calculated the cost of repaying the $10,000 credit balance using a low-rate card. Using a rate of 10.84 per cent (the average of the five cards with the lowest rates) and making a minimum repayment of 2.5 per cent, or $250, a month, the cardholder would take four years and two months to pay off the balance and would pay total interest of $2463.
If the cardholder pays an extra $100 a month, the time needed to repay the balance would fall to two years and 11 months and the total interest cost would be $1619.
Lalich says: ''Consumers with a rolling balance on a fully featured card should switch to a low-rate option. The extra interest they pay on the fully featured card will almost always outweigh the benefits they receive.
''Simply by being a bit more savvy and shopping around for a better deal, a customer paying the minimum repayment each month could save thousands of dollars in interest by switching.
''Customers with multiple credit cards should always pay off the one with the highest interest rate first or consider consolidating the debts into one through a balance transfer offer.''
Govt launches new consumer credit code
AAP
New laws designed to stop exploitative practices by banks and lenders will better protect consumers, the federal government says.
The National Consumer Credit Code was today launched by Finance Minister Chris Bowen and Consumer Affairs Minister Tony Robinson in Melbourne.
It would improve consumer protection and reduce red-tape for lenders and brokers by introducing lending conduct requirements, boosting the availability of relief to loans of up to $500,000 and provisions to stop predatory lenders using exploitative practices.
The national credit reform package will come into effect on July 1, replacing state and territory-based credit laws in place since 1992.
Mr Bowen said the reforms would provide greater protection for Australian borrowers against unfair and predatory lending practices.
Financial institutions will be prevented from sending unsolicited offers to increase credit card limits to customers they know would find it difficult to manage a higher limit under the code.
"Using credit cards is very convenient for consumers but there is a real risk for some consumers of getting into unsustainable amounts of debt," Mr Bowen said.
"Ensuring lenders do not encourage customers to take on unsupportable amounts of debt is a key consumer protection measure, allowing consumers to enjoy the convenience of credit will reduce the risk of getting into problematic amounts of debt.
A single national licensing regime and consistent requirements nationwide for lenders and brokers would reduce the regulatory burden, Mr Bowen said.
Monday, June 28, 2010
Credit Card Trick #2 - Backdated Interest
If you pay your bill late or not in full, most companies will charge interest from the date of your original transactions.
If you're one day late, you could be charged on all transactions up to 55 days ago!
If you're one day late, you could be charged on all transactions up to 55 days ago!
Wednesday, June 23, 2010
Credit card trick #1
Minimum payments don't cover the interest payable.
People think that by paying the minimum balance they have at least covered the interest... WRONG!!
Card companies reduce the minimum so it doesn't cover the interest.
Paying the minimum means you pay interest on the interest and dig a deeper debt hole!
(With thanks to David Koch in the Daily Tele, June 21, 2010.)
Kind Regards,
nobankruptcy.com.au
Charles Fairlie
Client Development and Marketing Director
m: 0434 52 44 66
East Lobby
Level 1, Suite 112
33 Lexington Dr.
Norwest Business Park,
BELLA VISTA NSW 2153
p: 02 9836 0444 f: 02 9836 0499
Saturday, June 19, 2010
Helping Aussies Avoid Bankruptcy
Have a look at our FAQ's to see how we can help you avoid bankruptcy... http://www.nobankruptcy.com.au/
Monday, June 14, 2010
Distressing debt figures
The debt figures, particularly the amount owing as cash advances, are a real worry...
Wednesday, June 9, 2010
Banks should be ashamed!
Article in today’s SMH... For Commonwealth Bank, 63 per cent of workers reported the debt-selling pressure, while 53 per cent of Commonwealth Bank-owned Bankwest employees reported the focus....
http://www.smh.com.au/business/bank-workers-fret-over-customer-debt-20100609-xudq.html
Tuesday, June 8, 2010
Retailers fighting for market share with credit cards
Retailer-branded cards are fighting for market share from other credit cards, but are they worth comparing? RateCity investigates.
May 27, 2010
We are constantly bombarded with options for both credit cards and store cards -just open up your letter box for promotions on credit cards or walk through your favourite department store where someone is bound to hand you a flyer about their store card. But how do you know which is the better card for you?
What's the difference?
Both types of cards offer customers with an opportunity to buy now and pay later; however there are a few unique differences between the two.
A credit card is a plastic card with a magnetic strip that people obtain through financial institutions to purchase goods and services as well as withdraw cash. They are issued with credit limits and both purchases and cash withdrawals incur interest rates. Some also provide points for spending money on the card.
A store card is similar to a credit card in that it is used to purchase items on credit however they can only be used within a particular store or range of stores, for example the Myer Card can only be used at Myer stores and charges a high 21.99 percent per annum at the time of writing.
But as our love of credit cards grows some larger retail chains are upgrading their store cards to offer a credit card with Visa, MasterCard of American Express so that you can use them anywhere which means more often. The GE Money Coles Group Source MasterCard, David Jones American Express Credit Card and Woolworths Everyday Money Credit Card are some examples, you can use them virtually anywhere and there are often bonus promotions for using the card at the card's branded retailer.
So how to choose which type of card?
With so much choice, here are six tips to follow that may help you in deciding which card is best for you and your lifestyle:
1. Compare credit cards online to find a credit card that offers a low interest rate and more rewards.
2. Look at the reward programs on offer and see which one will suit your spending habits.
3. Look at the way you shop, if you regularly shop at one store and it offers a store card or credit card perhaps look at the benefits you will receive versus a standard credit card.
4. Look out for a card that offers longer interest free days which gives you a period to pay back the balance of your card without paying extra.
5. Look for a card that is more readily accepted so you won't be limited to where you shop.
6. Does the card charge an annual fee? If you don't pay off your balance in time each month it may be worth paying an annual fee to receive a lower interest rate.
Friday, June 4, 2010
Dave Ramsay's take on Bankruptcy
The Truth About Bankruptcy
from daveramsey.com on 03 Aug 2009
Myth: I'll just file bankruptcy and start over; it seems so easy.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.
Bankruptcy.
That word sends chills up the spine. If you're facing the prospect of bankruptcy or in the middle of it right now, you know it's a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind.
Kathy called my radio show ready to file bankruptcy. Her debts were overwhelming, and her cheating husband had left with his girlfriend. The house was in his name, as was all the debt except $11,000. Kathy was 20 years old, and her brilliant uncle—a lawyer from California—told her to file bankruptcy. Kathy was beat up, beat down, and deserted without help, but she was not bankrupt. When her soon-to-be ex-husband ends up with all the debt in his name, he may be bankrupt, but Kathy won't be.
Why Avoid Bankruptcy?
Bankruptcy is not something I recommend any more than I would recommend divorce. Are there times when good people see no way out and file bankruptcy? Yes, but I will still talk you out of bankruptcy if given the opportunity. Few people who have been through bankruptcy would report that it is a painless wiping-clean of the slate, after which you merrily trot off into your future to start fresh.
Don't let anyone fool you. I have been through bankruptcy and have worked with bankruptcy for decades, and it is not a place you want to visit. Bankruptcy is listed in the top five life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. I would never say that bankruptcy is as bad as losing a loved one, but it is life-altering and leaves deep wounds both to the psyche and the credit report.
Types of Bankruptcy
Chapter 7 Bankruptcy, which is total bankruptcy, stays on your credit report for10 years. Chapter 13 Bankruptcy, more like a payment plan, stays on your credit report for seven years. Bankruptcy, however, is for life. Loan applications and many job applications ask if you have ever filed for bankruptcy. Ever. If you lie to get a loan because your bankruptcy is very old, technically you have committed criminal fraud.
Most bankruptcy cases can be avoided with proper help, such as our certified counselors and the Total Money Makeover. Your Total Money Makeover may involve extensive amputation of stuff, which will be painful, but bankruptcy is much more painful. If you take the thoughtful step backward to get on solid ground instead of looking at the false allure of the quick fix that bankruptcy seems to offer, you will win more quickly and easily. I know from personal experience the pain of bankruptcy, foreclosure, and lawsuits. Been there, done that, got the t-shirt, and it is not worth it.
Rise in middle-class bankrupts
DANIELLA MILETIC - SMH
May 24, 2010
PROFESSIONALS and people on high incomes are declaring bankruptcy faster than ever in Australia, according to a study that reveals bankruptcies have risen by more than a third in the past four years.
The report contradicts the common belief that most people who file for bankruptcy are either chronically poor with no other options or the hugely wealthy avoiding debt obligations.
Bankruptcy is increasingly becoming a ''middle class phenomenon'' in Australia, says the report from the University of Melbourne Centre for Corporate Law and Securities Regulation.
Professor Ian Ramsay, an author of the report, which will be published later this year, said the number of personal bankruptcy filings jumped by 6 per cent in 2008-09, after rising steadily over the past four years. There were 27,520 in 2008-09, an increase of 34 per cent since 2004-05, when there were 20,501 cases of bankruptcy. In 2009 the number of personal insolvency cases (which mainly involves bankruptcy but includes debt agreements) shot up to 36,487.
In an earlier study Professor Ramsay and his co-author, Cameron Sim, found that since 1990 there had been a 300 per cent increase in the number of personal insolvencies in Australia, far exceeding population growth and indicating a strong middle-class presence.
In their recent report Personal Insolvency in Australia, they have focused on middle class bankruptcy profiles. ''There are so many urban myths about bankrupts … students skipping on credit card bills, wealthy hiding assets who prefer to go into bankruptcy,'' Professor Ramsay said. ''They exist but are not indicative of the typical bankrupt.
''One of the biggest findings was that more and more of the middle class are being claimed by bankruptcy and, to us, it seems a social problem that has escaped notice.''
Because the phenomenon of the middle class bankrupt is so unheard of, Professor Ramsay said that Australians were largely unaware of the social costs to those affected, which includes tarnished credit ratings, difficulty in the workforce, cost to personal relationships and the still-prevalent stigma attached to becoming bankrupt.
He said insolvents are increasingly from higher-status occupations, have higher levels of personal and household income, and have rising asset and property ownership levels.
A major cause of rises in bankruptcy among the middle class, said Professor Ramsay, has been due to unsustainable home loans. Excessive use of credit as a cause of bankruptcy has jumped significantly in recent years, he added.
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