Credit Card Help

Banks are under increasing pressure to provide credit card help given the current financial climate. In Australia  all providers finance to consumers (not for business purposes) are signed up to the Consumer Credit Code (CCC). This is state legislation based on common principles. Under the CCC lenders need to provide “hardship provisions” or credit card help. Credit card help can consist of a variety of factors, is not defined in the legislation and is up to the credit provider to determine what is “reasonable”. Credit Card help factors include: freezing interest, freezing payments, or a combination of both. However credit card help is a short term solutions, lasting generally for 3 months and at the longest 6 months. If you situation relates to a short term problem this may be perfect but if your problem is more long term in nature you should look at other credit card help options.

Back Ground On Credit Cards

Credit cards are the most profitable products for banks and other finance companies. The first credit cards were released by specific companies, mainly petrol companies to traveling clients. The first card that you could use at multiple locations was developed by Frank X McNamara the founder of “Diners Club” in 1950, with the idea of consolidating multiple cards into one facility. Bank of America credited the Americard in 1958 which became the Visa network. With thousands of banks in America credit cards quickly became the easiest way to spend money as you might not have access to YOUR bank (no atms). This fueled to the rapid adoption of the credit card in America. The first credit cards were “charge cards” and the whole balance had to be paid off every month. What we think of as a “credit card” is actually a “revolving line of credit” combined with a “charge card” which allows a customer to only pay the interest (minimum payment) instead of the whole balance. This is lot more profitable.

By the 1980’s it was quickly become apparent that credit cards were the most profitable business to be in. Companies like GE which had been a manufacture entered the card market. The competitive market lead to credit cards being advertised just like any other consumable. TV Advertisement, junk mail and pre-approved credit card offers. Credit card adoption is now almost universal. Today there are 4 credit cards for every 1 person in America, while there is no equivalent data for Australia it can be assumed to be similar.

Why is Credit Card Help so Important?

With aggressive marketing and an the easy availability of credit cards Australia’s credit card debt in 2008 stood at $43 Billion. The minimum payment on these cards would be 860 million a month or $10.3 Billion a year. The minimum payment on Australia’s credit card debt accounts for 1% of GDP (the entire earnings of every Australian added together).

Example:

• Australia’s Annual Minimum Credit Card Payment 2008 $10.3 Billion

• Australia’s Total Military Expenditure in 2008 $26.4 Billion

Currently Australia has an average of $2000 in credit card debt. The scale of credit card debt means that Australians are particularly susceptible to credit card stress should their income reduce as in a financial crisis. Credit Card debt tends not to be evenly distribute through the community with those who are least able to afford it being forced to use it to for unexpected expenses. There is a large amount of political pressure currently on credit card companies to assist their clients when they fall into financial difficulties. A unified national consumer legislation is about to be based ensuring that voluntary hardship are mandatory.

Specific Government Credit Card Help

In 1996 the Commonwealth Government introduced legislation specifically with unsecured debts (mainly credit card debts). This option has become increasingly important due to rising rates of insolvency. Insolvency referrers to not being able to afford your current financial commitments. This has increased due to a variety of factors; banks increasing credit limits with out exploring affordability, dramatic increases in the cost of living, reductions in employment or overtime. Many people who where previously able to afford their debts are finding themselves insolvent. Credit cards help through Debt Agreements allows interest to be frozen and whatever proportion of the debt that is unaffordable to be written off.

The Benefits of Credit Card Help

Credit card help through debt agreements works in the the best interest of both the Creditor and the client. This allows the client to repay what they can afford and allows the creditor to minimize their loses.

[Bankruptcy] [Debt Consolidation] [Debt Consolidation Loans]