After years of stability, some turbulence prompted Australians to switch credit card providers en-masse. Here is why:
The saying “needs must when the devil drives” has been thoroughly tested in other banking sectors around the world, but in Australia, where the recession has been absent for more than a decade, people were always very loyal to their banks and hardly ever switched. This all changed during the recent property crash when big banks started to recall loans from clients they knew for years – and when the RBA lowered interest rates, but many card providers did not reflect this amply in the way they charge the consumer.
The consumer was eventually left with no other choice but to switch
Today, credit card comparison websites are popping up across Australia – and a more open market finally means that consumers have more choice to escape the debt trap laid by some of their card providers. People have realized that the banks are looking after themselves first and now consumers are mirroring that approach as we discuss below:
A man on a mission to educate and inspire change
Meet Roland Bleyer – the CEO of Australia’s leading credit card comparison website Creditcard.com.au. He is the man behind thousands of people who abandon the big banks for alternative options, all to get a better deal: more favorable terms and lower interest rates. When asked how he went about inspiring such a cultural shift in a country that is rather conventional with issues such as personal finance, Bleyer said: “We did this by equipping the public with powerful information in a series of courses they access on our site – and by connecting them to better options from alternative providers in a few simple clicks. By leveraging AI and technology to pair match the right people with the right providers, we save time for both parties, delivering a win-win outcome”.
Bleyer explained the magnitude of the credit card phenomenon in Australia, where people are totally in love with credit: “We might be a nation with a fantastic GDP per capita, yet Australian consumers racked up $50 Billion in credit card debt. If it was zero interest, fine, but it’s not: a massive $5.3 Billion was paid in credit card interest last year. Furthermore, it costed $1.5 Billion in credit card fees In Foreign fees alone. This comes to over $1 million dollars a day. When you think about these facts and the reality that Australians present a lower risk to banks than people in other struggling economies or heavily populated high-unemployment regions, well then Australians are not getting a good deal! So they have no choice but to compare the leading credit card deals to fight the banks – and get the deal they deserve”.
The rise of alternative credit card options
Whereas previously, the privilege to issue credit cards was severely limited to a handful of banks, today Bleyer’s comparison site features a string of providers such as NAB, Me, Virgin Money, Latitude, ANZ, American Express, Bank of Melbourne, BankSA, Citi, Wespac, HSBC, BankFirst, BOQ, BCU, Bank of US, Bank of Sydney and Bank West.
Evaluating a plethora of options in seconds
It would, however, have been impossible for the average working person to find the time to compare all these banks individually and make a decision. This is where comparison websites come in: At the click of a button, they aggregate the various options available. Consumers can then see a side-by-side comparison of what might be best suited for their individual circumstances. Some have lower interest rates; others have better perks while you spend (including air miles and zero fees on international transactions) and so forth. So, depending on what you need most, the aggregator provides an option to screen all the options – and to apply immediately to the most suitable ones.
It is, in fact, a genius invention as it is helping both banks and consumers find each other in a market that suddenly became more crowded. When education aggregators started in the US and UK, universities were critical: today they are all on board because they are losing enrolments. So is it also with the banks – now the biggest banks are after Bleyer in order to get a piece of the action.
Balance transfers are often the biggest attraction
Some 450 000 new credit cards were issued in Australia in the last year with the ASIC debt clock showing astronomical statistics. With 83% of young people using credit cards to support their lifestyle, many sit with debt on which they need to pay interest. So, in order to clear the debt easier, without interest or with very low interest, many opt for a “balance transfer”. This is simply when you apply for a new credit card from a new provider, use it to settle the balance on the old credit card and switch providers. Often these balances come with zero-interest for up to 24 months, either enabling consumers to “breathe”, or to set the debt without paying much interest.
Final scoop on credit card comparison in Australia?
The Australian credit card market will never be the same again: The consumer is awakening to a new set of rules that enable them to take back power from the big banks – the power to decide for themselves where the best deal exist at any point in time. Many consumers are now switching every two years, so this certainly represents a new trend to watch closely.