Credit Card Debt: Swimming with the Sharks

Cheque, savings or credit? Anyone who makes regular purchases on plastic hears this question often. Statistics show that too many of us must be choosing the credit option, as we're a nation in debt. The average Australian owes over $2,500 on each of their credit cards and we're continuing to get over our heads in debt.

Credit cards are the predators of the financial seas, as they allow borrowers to spend money that they don't have.

Aussie claims to be taking on the credit card sharks with their Aussie MasterCard. Offering a lower interest rate than many competitors, the Aussie MasterCard is available for an annual account fee of $49.

To be eligible for an Aussie MasterCard, applicants must be at least 18 years of age with a good credit history and an income of at least $15,000. This is a significant income requirement considering the fees, charges and interest payable on a credit card.

Aussie differ from the big banks by not offering a credit card reward scheme with the Aussie MasterCard. This is to Aussie's credit, as these schemes are generally profit-makers for the banks as they encourage excess spending to accumulate masses of points to be converted for far less valuable items.

What Aussie lacks in profit-making opportunities through credit card rewards, they make up for in fees. If you spend over your credit limit with your Aussie MasterCard, you will be hit for a $35 Overlimit Fee. A $35 fee also applies if you fail to make your Aussie MasterCard minimum repayment amount within 28 days of your statement period.

If you use your Aussie MasterCard to access a cash advance, you will be charged whichever is the greater amount out of $1.25 for an ATM cash advance, $4.00 for a Branch or Overseas ATM Cash Advance, or 2% of the total cash advance amount.

It pays to be organised if you are an Aussie MasterCard holder, as a $14 charge applies to receive a duplicate copy of your statement.

Ideally, you should use your credit card only for emergencies and use alternative methods of payments, such as Visa or MasterCard debit options.

If you already have credit card debt, an effective way to reduce it may be to consolidate your credit card debt onto your home loan. The interest rate on home loans is generally close to half of credit card interest rates, so the interest you save can then be put towards clearing your debt sooner.

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