MONEY MAGAZINE - JULY 2007 ISSUE - ANDREW WILLINK'S COLUMN
DID YOU REMEMBER TO PAY YOUR CREDIT CARD?
Yes, there is a way repayments can take of themselves. It's called automatic repayment and over 90% of credit cards on the market offer it, although many credit card holders don't realise how useful this facility can be. Once you set up an automatic repayment with your bank, the amount of money you nominate will be automatically debited every month from your chosen account into your credit card account. You can nominate that repayment to be the full amount, the minimum amount or a fixed amount of your choice.
There's no doubt an automatic repayment feature on your credit card is convenient, particularly when you are away from home, but its true value lies in its ability to protect you from late repayment fees. This is important for consumers wishing to avoid making an unexpected donation to their financial institute. Bank penalties are a hot topic ever since the recent announcement by the Reserve Bank that the amount earned last year by Banks from their household credit card operations now exceeds $1 billion in fees alone.
Some fees are unavoidable, such as annual fees, but others can be minimized or avoided altogether. Cash advance fees can, and should, be avoided. Penalty fees with a sting, such as late payment penalties and over-the-limit penalties, are often the result of poor planning and sloppy credit card behaviour. In an ideal world, these can also be avoided, however, we all slip up every now and then and are guilty of these misdemeanours.
Only 3 of the 245 cards tracked by RateCity do not have any penalties when you go over your approved credit limit and the maximum fee charged is $40. This is also the maximum amount for a late payment penalty, although nearly 100 of the cards charge $15 or less. In order to halt the growth of bank penalties at your expense, consumers should be vigilant in their management of credit card accounts. It is as this point that we come back to automatic repayment and its potential to save you a penalty as high as $40 for a late payment. The only catch with automatic repayment is to make sure you have enough funds in your account each month at the time your credit card repayment is automatically deducted.
Andrew Willink, Executive Chairman
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