Media Release

How 10 credit card mistakes are costing cardholders $7.6 billion in one year

  • Australian credit card holders spent an estimated $6.3 billion in interest in the past year
  • Plus households were charged $1.3 billion in fees
  • lists 10 common mistakes that cardholders make and how to avoid them

APRIL 28, 2014, SYDNEY – Australia’s biggest credit card comparison website[1] is warning cardholders to stop making mistakes, costing them $7.6 billion in the past year alone.

New research from shows cardholders spent $7.6 billion including $1.3 billion in credit card fees in the past financial year and $6.3 billion in interest over the past year to February 2014.

Per credit card, Australians were charged $405 in interest over the past year, with an average recurring balance accruing interest of $2,255 per card, or a combined $34.8 billion.

The research was based on’s average purchase rate of 17.95 percent and Reserve Bank of Australia figures of total credit card balances accruing interest, number of credit card accounts held on average in the past year and credit card fee revenue to banks from households.

Michelle Hutchison, Money Expert at said many cardholders are using credit cards incorrectly, which is costing them significantly.

“Credit cards are notoriously difficult to understand as there are so many different ways that providers calculate fees and interest charges, as well as the types available. The typical cardholder can get bogged down in the fine print or not read the details that matter the most.

“It’s often the fine print that can leave the biggest sting to credit card holders because they don’t realise how they will be charged, or how much their card actually costs in fees and interest, or if this type of card is best suited to their spending habits.”

Below is a list from of costly credit card mistakes and how to avoid them:

  1. Thinking you’re on an interest-free period but you haven’t paid your balance in full: All purchases you make that month and the balance outstanding can be charged interest if you don’t pay off your balance in full. Some providers will backdate the interest charged all the way to the original balance for that billing cycle, not just when the payment was due. For example, if you make a $100 purchase 10 days into your billing cycle with an outstanding balance of $500, interest could be charged on the whole $600 balance from the beginning of the billing cycle, or for just the $100 purchase, depending on the provider. This holds true if a balance at the end of the billing cycle is just $1 or the bill was paid after the due date.
  2. Forget about interest-free days on purchases if you have a balance transfer: Any new purchases you make on a card that has a balance transfer debt will be charged interest. Say you move over $3,000 to a new card for 0 percent interest on the balance transfer, then use that new card to buy something for $100. Your $100 purchase will then be charged interest every day from the date of purchase. It’s not a good plan to use a credit card for purchases if you’re trying to pay off a debt, so try to set a budget and pay down this debt without accumulating more debt on your credit card.
  3. Being charged a balance transfer fee: On, there are many 0 percent balance transfer offers lasting up to 24 months, but some charge an initial transfer fee. This is often a percentage of the balance transferred. For example, transferring $10,000 to a card with a 3 percent balance transfer fee will cost you $300 upfront. It’s important to check if the card charges a balance transfer fee and weigh it against the potential interest you would pay on a shorter term card to see if it’s the right choice for you.
  4. Not applying for a big enough credit limit for a balance transfer: Many cardholders don’t realise that balance transfers have limits on how big a balance you can move over. This is often a percentage of the new card’s credit limit. For example, say you want to port over $20,000 to a new card with a credit limit of $20,000 but it has a balance transfer limit of 80 percent of its credit limit. That means you can only balance transfer $16,000.
  5. Paying foreign currency conversion charges overseas and online: You’ll likely be charged these when you purchase something in a different currency to Australian dollars, say by shopping overseas or from international retailers online. This fee can range from 1.5 to 3.5 percent of the amount being exchanged. Even PayPal charges this fee, so the only way you’ll avoid it is by getting a card that doesn’t charge foreign transaction fees like GE Money’s 28 Degrees or Bankwest’s Zero Platinum cards.
  6. Not being aware of cash advance fees and higher interest: If you withdraw cash from your credit card from an ATM or carry out a few select types of transactions (like gambling, for example), you’ll likely be charged a cash advance fee by your provider. These can range from a few dollars to a percentage of the amount withdrawn. Cash advance rates are also generally much higher than purchase rates: the average cash advance rate is 20.48 percent while the average purchase rate is 17.95 percent according to the database. You also won’t get any interest-free days, which means you’ll be charged interest right from the moment the money hits your hand. It’s best to leave your credit card for purchases and use your debit card for withdrawing money.
  7. Being stung by revert rates: If you sign up to a credit card for a balance transfer or introductory purchase rate, if you have a balance left over after the term, the rate it reverts to can be much higher than you think. Most balance transfers revert to the card’s cash advance rate, which is on average over 20 percent. So make sure you pay off your balance before the honeymoon period ends and check which rate your card reverts to before signing up.
  8. Having no benefit from a rewards credit card: Cardholders who don’t spend at least $12,000 per year or don’t pay off their balance in full each month, won’t benefit from a rewards credit card. This is because the annual fee and interest generally outweigh any value of rewards programs. For instance, the average purchase rate for a rewards credit card is 19.66 percent and average annual fee is $180. Compared to non-rewards cards, the average purchase rate is 15.90 percent while the average annual fee is $65.34.
  9. Confusing what your points are really worth: Some cards will earn you rewards points with the provider rather than Qantas or Velocity points. When you convert these provider points to Qantas or Velocity points, the conversion isn’t necessarily one-for-one – you may have to swap two or three provider points, which was worth one point per dollar, for one Qantas or Velocity point, which then makes these points worth 0.33-0.5 points per dollar.
  10. Not picking the right type of card for your spending habits: Most cardholders can avoid high fees and interest, so compare cards and choose one that suits your spending habits. For instance, if you don’t use your card very often or you pay off your balance in full each month, you shouldn’t be paying an annual fee. Conversely, those who struggle to pay off their balance each month shouldn’t be on a card with a high rate and low annual fee. Choosing the right type of card that best suits your spending habits could save you a small fortune.

1 is top credit card comparison website based on traffic recorded by Experian Hitwise, 2014


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The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on's review pages for the current correct values.

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