How you manage your credit card account and credit limits are about to get easier. The Australian government is rolling out four credit card reforms which are designed to protect cardholders over the next financial year. These changes kicked in with a ban on credit limit increase invitations from banks on 1 July 2018, and will also impact how cardholders can cancel their cards, change their credit limits and are charged interest.
Ban on credit card limit increase invitations
Card card issuers can not contact customers to offer credit limit increase invitations. This includes all forms of communication (including email, phone and in-branch). This applies even if customers have previously provided consent to receive these invitations.
The following Reforms will take place from January 1st, 2019.
Credit card limit assessments
If you’re applying for a new credit card or requesting a credit limit increase, the card issuer must assess your application based on your ability to repay the entire credit limit within a three-year period.
Online card cancellations
Credit issuers must give customers the option to cancel their accounts or reduce their credit limits online. When a customer makes a request, the credit issuer must take reasonable steps to help the customer meet their request. This means that card issuers can no longer offer contrary suggestions when you’re trying to close your account or reduce your credit limit.
Ban on back-dated interest charges
Banks and credit card providers can not retroactively charge interest on credit card balances. This will impact on the interest-free days feature many cards offer. Previously, if you didn’t pay the full amount listed by the due date on your statement, interest would be back-dated based on when purchases were made. This will not be the case from 1 January 2019.
Previously, the 2012 credit card reforms stopped card issuers from making unsolicited credit card limit increase invites. So cardholders had to opt to receive credit limit invitations either at the time of applying for the card or by contacting their bank directly. Opting out of these invitations didn’t stop banks from contacting cardholders electronically or over the phone.
However since 1 July 2018, credit issuers can no longer invite cardholders to increase their limit over any form of communication and the consent exemption has been removed. If you have assessed your finances and decided you do need to increase your credit limit, you’ll need to contact your bank to do so. You can check out our guide to increasing your credit limit for the steps you’ll need to take.
The stricter eligibility assessments during the application approval process could also impact how much credit you can access. This means that you may be approved for lower credit limits than you have been in the past. This is especially important to remember if you’re planning to apply for a balance transfer. If you get approved for a credit limit that’s lower than the balance you’re transferring, the remaining amount will stay in your old account and continue to collect interest.