1st street Blog

Sydney’s property market proved its resilience last year. Despite lockdowns and Australia’s first recession in 30 years, property prices only dipped slightly before rebounding.

By the end of the year, the median price was just over $870,000 – up 2.7% on December 2019’s values, according to CoreLogic.

But that’s only half the story.

Sydney’s rebound started gaining pace in late 2020. So, while the median price may have ‘only’ risen 2.7% over the year, it jumped 1.3% in the final quarter and 0.7% in the final month.

What’s more, SQM Research (one of Australia’s most respected research houses) is now tipping Sydney’s prices to rise by up to 11% in 2021.

And SQM Research isn’t the only one making bullish forecasts.

Big four bank ANZ expects the city’s prices to rise by 8.8% while national buyer’s agency and property research firm Propertyology is expecting 2021 to be a “once in a generation property boom”. They earmarked Sydney for between 5% and 10% house price growth.

What’s driving this momentum?

Interest rates have never been this low

Following not one but three cuts to the official cash rate in 2020, home loan rates dropped to all-time lows – with some even starting with a ‘1’.

And rates are going to stay at these historic levels for the foreseeable future. The Reserve Bank of Australia’s (RBA) board has said they do not expect to increase official interest rates “for at least three years“.

Ultra-low rates mean it’s never been cheaper to service a mortgage – luring people into the market. And the data backs this up. According to the most recent home loans data from the Australian Bureau of Statistics, November 2020 saw the value of new home loan commitments hit record highs.

Government incentives are fuelling demand

Adding further fuel to the fire are government first home buyer incentives.

There’s the federal government’s First Home Loan Deposit Scheme – under which eligible first home buyers can purchase a new home with a deposit of as little as 5%, and without having to pay lender’s mortgage insurance (LMI).

On top of this, stamp duty for first home buyers in Sydney has been temporarily waived on new properties worth up to $800,000, with concessions granted for homes between $800,000 and $1 million.

Combine these incentives with the ultra-low interest rates on offer and it’s no wonder first home buyers are back with a vengeance – with numbers hitting an 11-year high.

More competition for limited stock

More buyers around means more competition for homes, helping to push up prices. To make matters worse, there’s a shortage of stock. Property listings in December 2020 fell by 18.3% month-on-month in Sydney.

Thinking of buying in 2021?

If you’re thinking of buying a property this year, it’s probably a good idea to act sooner rather than later.

Because, if prices do, indeed, rise by 11% in 2021, a property that cost you $800,000 at the start of the year will cost you $888,000 at the end of the year.

As you can see, delaying could be very costly indeed.

If you are thinking about buying, the sooner you visit a 1^st Street mortgage broker to get your finance sorted, the better.

1st Street is proud to be Mortgage Professional Australia’s number one brokerage in the country for 2020. So we’re sure we can get you the very best home loan!

Get in touch with us today by filling in this online form, calling 1300 17 87 87 or emailing info@1ststreet.com.au

When you took out your home loan with 1^st Street, we would have ensured you had a competitive rate at the time. But a lot can change in a small amount of time. Just look at the past year we have been through.

The Reserve Bank of Australia cut the official interest rate not once, but three times in 2020. As a result, it now sits at a historic low of 0.10%. In response, lenders slashed their home loan rates, causing rates to plummet to all-time lows.

Unbelievably, some home loan fixed rates now start with a ‘1’!

So there’s a chance your home loan is no longer market-leading. What’s more, Australia’s mortgage market is extremely competitive with lenders fighting hard for your business. So, alongside the ultra-low rates, some lenders are even offering cashback deals and other incentives to sweeten the deal.

Of course, special offers shouldn’t be the main reason you refinance. That honour goes to your potential savings and remaining in a suitable loan product.

You could save tens of thousands of dollars.

Refinancing to a new loan could potentially save you tens of thousands of dollars over the life of your loan. That’s because seemingly small differences in rates quickly stack up over time.

For example, say you have $400,000 left on your mortgage. You got what was a competitive deal on a home loan three years ago and are currently paying 3.60% interest:

• Monthly repayments = $2,024.01
• Interest charged over the 25-year life of the loan = $207,203

Switch to a loan that’s just 50 basis points lower at 3.10% and your monthly repayments would drop by just over $100 a month. More importantly, the total interest you’d pay over the life of the loan would be over $31,000 less.

Yes, really.

What about 100 basis points lower? Pay a rate of 2.60% and your savings are even more astounding:

• Monthly repayments = $1,814.68
• Interest charged over the 25-year life of the loan = $144,403
• Total saving = $62,800

Imagine what you could do with that money.

Remember, there are some extremely low rates around. And the bigger the difference you score, the more you’ll save and the lower your monthly repayments will be.

That’s why you need to give your home loan a health check in 2021.

Want to see how much you could save? Use our home loan comparison calculator.

Not all loans are created equal.

While interest rates do matter, they are not the be-all-and-end-all of home loans. The right home loan for you needs to tick all the boxes in terms of your financial needs, circumstances and goals.

That’s why you should get advice from your 1^st Street mortgage broker. We will give your home loan a thorough health check and help you assess all your options.

At 1st Street, we’re not just the best local mortgage broker – we were also Australia’s number one brokerage in the country for 2020.

Speak to your 1^st Street mortgage broker today to give your home loan the check-up it needs.

With mortgage rates at their lowest since the days of black and white TV, this might be the right time to make a serious dent in your home loan. 

Lower rates mean any money you have in the bank could be earning less interest. But if you have a variable home loan rate and your lender passes on the cut, you’ll pay off more of your loan faster just by keeping your payments the same. 

Upping your payments means you can really take advantage of lower rates, saving time and money on your mortgage. 

Adding an extra $50 a week can chop $50,000 from a loan of $400,000 – and pay off the loan four years earlier. 

When fifty bucks seems a lot

If fifty bucks sounds like a lot, even twenty can make a dent in your repayments over time, as long as interest rates stay low. 

That’s around one cup of coffee a day in a working week. 

Because interest on home loans is calculated daily, even chipping in small amounts can make a big difference over time. 

The table below shows how an extra $20 a week on a $300,000 loan takes over two years and $20,000 off. Further up the scale, an extra $100 a week slices off over three years and the best part of $100,000 over the life of the loan. 

Of course, we’re all different. Whether you’re willing or even able to make extra repayments depends on your circumstances. 

Good times, bad times

Depending on your situation and financial goals, a cut in interest rates may not be all good news. 

If you have a fixed rate, your mortgage payments are unaffected by the interest rate cut. 

If you’re unsure whether your loan is fixed or variable, now is a good time to check. If you’re on a fixed rate, you might talk to an expert to find out if there’s a better deal out there, or whether switching to a variable rate might work for you. 

Other things you could do

There’s more to low interest rates than your mortgage. 

For instance, you might instead choose to pay down bad debts such as your credit cards. Or use the money that you save on repayments to invest elsewhere to help grow your wealth. 

This could involve alternatives to cash such as buying shares or property. These carry their own pros and cons, so it’s a good idea to get advice so you understand the risks involved, and whether they are right for you. 

It all depends on your situation and financial goals. We can help you decide the best way to make the most of low interest rates. 

First published 28 August 2019

How the move to electronic payments could be making it easier to spend…and what to do about it. 

It’s Thursday morning and almost the end of the working week. You’re walking to the train station and you realise you’ve forgotten to top up your public transport card. No matter…a few clicks later and you’ve transferred $50 over. 

At the station you grab a takeaway flat white before the train arrives…tap and go, too easy. At lunchtime you jump online and scroll through your newsfeed. Wow, there’s a pretty good one-day special from your local department store. You end up buying a new pair of pants, a replacement for your old wok and a couple of books. 

After work you’ve got a few drinks organised with colleagues before heading home. When it’s your round you tap to pay with your smartphone. That night there’s nothing on TV. A few clicks from the comfort of your couch later and you’re settled in to watch a new movie you’ve downloaded. 

Over the day you’ve spent close to $400 without touching a coin or banknote. It’s so effortless online, and the ease of tapping your card or phone at the supermarket or café beats the hassle of carrying coins and notes hands down. Plus with every transaction recorded it makes it easier to track your spending, budgeting and investments. What’s not to like? 

Winners and losers

Cash payments in Australia are declining rapidly. Cash accounted for just 10% of all payments in 2017 and by 2022 this will fall to 2%. For all intents and purposes, Australia will be a virtually cashless society.i 

It’s a trend that certainly has government backing. From an official perspective the notes and coins we were happily using for centuries have a lot to answer for. Banknotes and coins cost money to produce, they help to facilitate criminal transactions and they make it easier to avoid paying tax. 

So the move to a cashless society dominated by electronic transactions, contactless payments and tap-and-go smartphones can only be a good thing for everyone, right? 

Not necessarily. Like any technological development, there are winners and losers. In a cashless society the poor and elderly can find it difficult to access funds and pay for essential services. 

Recent research in the UK highlights how much cash is still relied upon by older and poorer citizens. While only 4% of adults rely on cash, that includes some of the most vulnerable members of society. When you look at people who rely on cash day in day out, 39% are aged 65 or over and 62% have an income of less than 9,000 pounds (around $16,170).ii 

How cashless impacts your spending

In the dash to cash we could be in danger of leaving more vulnerable sections of society behind. And the concerns about a cashless society don’t end there. 

• What implications are there for privacy when every transaction can be logged and monitored?
• What protections are there against hacking and cybercrime in our electronic world?
• What backup plan is in place if the technology fails during an outage?

But one of the major concerns about going cashless is how easy it makes it to spend money online or with the touch of a card or smartphone. 

And you don’t even have to pay for the goods upfront, with AfterPay letting you order online and receive your goods before deciding whether you want them. 

Managing our spending has got a whole lot more complex without the tangible reminder of dollar notes and coins in our wallets and purses. 

And what about the next generation? It can be difficult to teach kids about money when they see us paying for goods so effortlessly without handing over any cash. Are they equating swiping a card with paying a physical dollar? 

5 tips to control your spending in an electronic world

1. Try going out without your credit card to remove temptation—you can still pay for essentials, but you’ll need to use notes and coins. 

2. Think about moving from a credit card to a debit card so that you’re not spending money you don’t have—even if it is tap and go. 

3. Teach your kids about money by giving them a list of things to buy with a specific amount of cash—if they run out, they’ll need to adjust their budget rather than access easy credit. 

4. Embrace the online advantages of monitoring your spending by using a budgeting app like AMP’s Budget Planner Calculator. 

5. Ringfence some of your income from temptation by setting up an automatic transfer to a higher interest savings account. 

The digital revolution is no different to past innovations in its capacity for good and bad. While your smartphone certainly makes it easier to rack up a pretty big bill without too much trouble, it also makes it easier to track your spending and set up a budget. 

As the move to a cashless society changes our money habits, our challenge is to harness the power of the new technology to make a positive difference to the way we spend and the way we save. 

i Finder.com.au, The humble cheque to be extinct by 2019, 1 February 2018. 

ii RSA Action and Research Centre, Cashing out: The hidden costs and consequences of moving to a cashless society, January 2019 

©AMP Life Limited. First published August 2019

What is financial wellness?

How you feel, is your wellness. How you feel about your money is your financial wellness. This can be measured by the financial wellness index, which measures a person’s satisfaction with their current and future financial situation. 

Some days you might feel confident you can meet your needs within the boundaries of your current income, whereas other days you may feel like you don’t have nearly enough funds in order to do so. 

The truth is, you’re not alone. Nearly 2.5 million Aussies say they feel moderately to severely financially stressed, even though financial stress has been decreasing year-on-year in Australia.i 

Improving your financial wellbeing

On a positive note, research identified that those who have been financially stressed in the past were often able to recover through changes to their behaviour and mindset.ii 

Here are some suggestions of things you could do (if you aren’t already) which may help you to improve how you feel financially. 

1. Create a budget that works for you

When it comes to creating a budget, try jotting down into three categories – what money is coming in, what cash is required for the mandatory stuff (such as bills), and what dough might be left over (which you may want to put toward existing debts, savings or your social life). 

Writing up a budget may take an afternoon out of your diary, but it will help you to more easily identify where there’s room for movement. For instance, could you reduce what you’re spending on luxury items, subscription or streaming services, eating out or clothing? 

2. Consider rolling your debts into one

If all the small debts you once had, have multiplied and grown into bigger debts – you could look to roll them into a single loan, and reduce what you pay in fees and interest. 

This could help you to save a significant amount of money (depending on what you owe) and make it easier to manage your repayments, as you’ll potentially only need to make one monthly repayment rather than having to juggle several. 

The main thing to ensure is you are paying less than what you are currently when it comes to interest rates, fees and charges, and that you’re disciplined about making your repayments. 

3. Try to save a bit of money regularly

Even a small amount of cash deposited on a frequent basis could go a long way toward your savings goals, with a separate research report indicating the average savings target for Aussies is a bit over $11,000.iii 

Some tips people said helped them along the way was transferring spare funds into an actual savings account, setting up automatic transfers to their savings account (so they didn’t have to move money manually) and putting funds into an account which they couldn’t touch.iv 

4. Set aside some emergency cash

With research showing that an emergency fund of between $4,000 and $5,000 is generally enough to cushion most working Aussies when it comes to unexpected expenses, it’s probably worth some thought.v 

An emergency stash of cash could give you peace of mind and reduce the need to apply for high-interest borrowing options should you be faced with a busted phone, car tyre, or bad landlord. 

5. Be open to talking money with your partner

One in two Aussie couples admit to arguing about money,vi so if you haven’t already, it might be worth sitting down to ensure you’re on the same page and that both parties’ goals are being considered. 

6. See if you can get a better deal with your providers

You more than likely have several product and service providers, and figures show you could save more than a grand annually on energy alone just by switching from the highest priced plan to the most competitive on the market.vii 

Again, this may take a couple of hours out of your day, but the savings you could potentially make may make a real difference to what you cough up throughout the year. 

7. Don’t be afraid to seek financial assistance

If you are struggling to make repayments, you may be able to seek assistance from your providers by claiming financial hardship. 

All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period. 

Of course it also helps to have an expert on your side and we are here to support you to achieve and maintain financial wellness. 

1, 2, 5 AMP’s 2018 Financial Wellness in the Australian Workplace Report, pages 7, 8, 14 

3, 4 MoneySmart – How Australians save money infographic 

6 Finder – Heated conversations: 1 in 2 Aussie couples argue about finances paragraph 1 

7 Mozo – Sick of high energy bills? Aussies willing to change providers could be saving over $1,000 a year paragraph 2 

©AMP Life Limited. First published October 2019

Did you know that an effective mortgage strategy can actually help you grow your wealth?

Here are some handy tips…

Offset Account

An offset account is a transactional account linked to your home loan. The balance held in this account “offsets” the balance in the mortgage, helping to reduce the interest paid and overall term of the loan. Many lenders offer a 100% offset account as a feature with standard variable home loans.

The money deposited in the offset account can be withdrawn at any time. This arrangement offers major tax advantages for borrowers to pay off owner-occupied properties (which don’t offer tax deductions on interest) while still retaining access to the money. Mortgage offset accounts provide financial flexibility to homeowners.

Managing your money

Money management is of the utmost importance. It is vital that you are aware of all expenses and remaining income, as this is what you will have left to pay off your debt. You will also be quick to realise how much money you can use to invest.

Work with your 1st Street mortgage broker on building out a detailed budget so you go into the transaction with a clear idea of your financial situation.

There are plenty more clever ways to utilise loan products to enable you to grow your wealth and manage your risk. If you would like to discuss further, please get in touch.

Take advantage of interest deductions

The only way to take advantage of your interest-related deductions is through borrowing to pay for investment and business purchases and expenses.

If you don’t borrow upfront to cover for all expenses relating to the purchase (which are deductible) you will end up paying for these deductions post-tax instead of pre-tax. Before proceeding with any investment decision and potential tax deductibility, we advise you to speak with your accountant prior to making any commitment.

Risk management

Risk management is key, and it is important to have cash flow and funds should financial pressure hit.

Here some ways you can manage your risk:

• creating buffers using equity, redraw and offset accounts
• borrowing for asset purchases to maintain cash without paying extra interest due to the use of offset accounts
• fixing interest rates on your debt to provide certainty
• restructuring your repayments in advance of cash flow changes, such as parenting, employment changes and property purchases
• depending on your circumstances, utilising one lender or multiple lenders or delinking mortgages. Alternatively, cross collateralising can be a positive subject to other strategies executed, contrary to popular opinion.

Hold properties

Each of the four preceding strategies can positively impact your ability to hold property. You can optimise current and, importantly, future tax deductions, minimise debt on a future home while optimising deductions on an existing home when it becomes as investment. This requires aligning your mortgage strategy with your future property planning and goals.

Having to sell property you could have otherwise held over your lifetime is one of the big killers of financial wealth. Keeping property that you would have otherwise sold may literally add a million dollars or more to your bottom line in retirement. This is a mistake I made in my early years, and a prime example of the unrealised power of an effective mortgage strategy.

Your mortgage strategy will have a huge impact on your ability to maintain positive cash flow, property and investment opportunities. Feel free to contact 1st Street should you have any queries or like to discuss this in more detail.

Saving money doesn’t just happen, but these steps could help you to reach your saving goals sooner.

How Australians save

Research has found that almost three quarters of Australians surveyed save by putting spare money into a savings account, whether they do this themselves or via an automatic transfer. Other popular savings methods include keeping savings money in an account they can’t touch, building up extra savings in their transaction account or depositing savings into their home loan offset account.ⁱ

But everyone is different and just as your strategy for how to save money might be different to these, so might your savings goals.

What are you saving for?

Recent research indicates that the most popular things Australians are saving for are a holiday, a rainy day, and to buy or renovate a home.ⁱ

Whether it’s one of those, or something else, the first step in saving is to figure out what your savings goal is. Then you’ll need to work out how much you’d like to save, and by when.

Money saving tips

Once you know your goals and timelines you need to work out where the money will come from. For some people, this might be the entire surplus between their pay and what they spend each month.

If you’re spending every cent that comes in, you’ll need to identify extra income you might be able to earn or think about cutting back spending to free up money for your savings goals. The following tips could help:

1. Create and track your budget

Creating a budget can help you track expenses you can avoid or reduce, such as expenditure on non-essentials like pay tv, gym memberships, buying your lunch at work, entertainment and eating out. Cutting back a little on expenses could make a difference.

2. Review your providers

Unfortunately, bills are a part of life, but it’s possible you may not be getting the best deals available in the market, especially if it’s been a while since you last contacted your providers. You can contact them directly or make use of the many product and service comparison sites available online

3. Think green and cut wastage

If you find you’re throwing out food at the end of every week, you might be able to reduce your grocery spending. Instead of replacing household goods consider whether items can be repaired, reused or upcycled.

4. Consolidate debts

Having multiple debts such as credit cards, personal loans and a home loan could mean you’re paying more in interest rates and fees than you have to. Not only could combining your debts help make money management easier, it could save you money.

Savings tools

Once you’ve identified your savings goals and found some money to save you’ll need to work out the best method of saving for you.

When looking for a suitable savings product you’ll need to consider many things, including the fees charged, interest rate, how accessible your money is, whether you can set up an automatic direct debit, and whether there’s a minimum amount you need to deposit each month.

We look at some of the key features of common saving product options below.

Savings accounts

Standard savings accounts are usually low fee, and your money is readily available, but they can pay a lower rate of interest. High interest savings accounts offer you the opportunity to earn a higher rate of interest on your money but there may be penalties for withdrawing your money before a set period of time has passed or ongoing minimum deposit requirements.

Offset accounts

An offset account can help you save money by minimising the interest you pay on your home loan. Putting any extra money you have into your offset account can help accumulate savings and also offset your home loan balance. This means you only pay interest on the remaining portion of your loan.

Term deposits

Term deposits lock your money away for a certain timeframe in return for a guaranteed interest rate return during that time. A general rule of thumb is the longer the timeframe, the higher the interest rate. Term deposits are generally low in fees, typically require a minimum initial deposit, and can sometimes require a minimum ongoing deposit.

Investment bonds

Investment bonds can offer a tax-effective way of saving for the long term (longer than 10 years). They typically require either a minimum deposit or minimum ongoing deposits, and you can choose how your money is invested.

We can help you get started on saving. Give 1st Street a call.

i ASIC Moneysmart, How Australian’s save money.

© AMP Life Limited.
First published November 2018

Many parents approach the topic of money differently, but could your way of doing things influence your kids’ success?

The majority of Aussie mums and dads recognise that they’re accountable when it comes to shaping their children’s perspective around money matters.

A recent report published by the Financial Planning Association of Australia (FPA), revealed parents listed themselves (95%), followed by grandparents (63%) and teachers or coaches (59%) as the top three biggest influencers when it came to instilling money values in their kids.ⁱ

What money conversations are parents having?

As part of the research, parents said they mainly concentrated on day-to-day issues when talking money with their children, admitting that more contemporary issues, such as making transactions digitally, were sometimes overlooked.ⁱ

What parents said they discussed:ⁱ

• 52% – how to spend and save
• 43% – how to earn money
• 32% – how household budgeting works
• 24% – how much people earn
• 19% – making online purchases
• 13% – in-game app purchase
• 5% – buy now, pay later services, such as Afterpay.

What approach do you take with your kids?

The research undertaken indicated that there were four prominent personalities parents assumed when discussing money with their children, with some parents initiating conversations more frequently, while others were sometimes a little more hesitant.ⁱ

The four distinct personalities that came out of the research included:ⁱ

THE ENGAGING PARENT

Common traits:

• You have the most conversations around money with your kids and feel comfortable doing so
• You tend to have a higher household income
• You’re more likely to use money to encourage good behaviour in your children
• Due to high engagement, your kids are often more financially prepared than other kids
• Your kids have a greater interest in learning about all types of money matters.

The side-stepping parent

Common traits:

• You are less comfortable talking to your kids about money so have fewer conversations
• You may have less money coming in as a household
• You’re less transparent about what you earn and money matters in general
• You tend to provide the least amount of pocket money and as a result your children may be less interested in learning about money and how to make transactions.

The relaxed parent

Common traits:

• You’re comfortable talking to your kids about money but don’t do so too often
• You take a relaxed approach to money matters and are transparent about money issues
• There is little financial stress in your home
• Your relaxed nature may lead to your children missing out on opportunities to learn about money, which means your kids may need to explore money matters on their own.

The do-it-anyway parent

Common traits:

• You’re not always comfortable talking about money but still have frequent conversations
• You’re mainly concerned your child will worry about money if you talk about it
• Despite your discomfort, your perseverance generally pays off
• Your teenage children are more likely to have a job than the average child.

What approach is best according to the research?

Engaging parents were more likely to report that their children were more curious, confident, and financially literate than they were at their age.ⁱ

According to parents who fell into this category, their children were the most equipped to understand and transact in today’s digital world and their teenagers were the most likely to have a job and make online purchases for themselves or their family.ⁱ

In addition, the research found children with a paid job outside of the family home were more financially prepared to engage with money.ⁱ

They were also used to transacting digitally and showed greater interest in learning about paying taxes and superannuation than those who didn’t have a job.ⁱ

If you need help to manage your money more confidently so you can pass on good habits to your kids, give 1st Street a call.

i Financial Planning Association of Australia: Share the Dream – Research into raising the invisible-money generation 2018 page 6,

© AMP Life Limited.
First published February 2019

Here are some tips to start paying off your debt

$45 billion. That’s how much Australians owe on their credit cards.ⁱ

Now, perhaps that’s no drama if we’re not paying too much to access credit and we’re managing to avoid interest charges by paying back what we owe on time.

But we paid a collective $1.5 billion in fees in 2016-17.ⁱ And we’re taking out new credit cards at an increasing rate. Two in five Australians are juggling more than one credit cardⁱand 300,000 new credit cards accounts were opened over the five years to 2017, bringing the total number of cards in Australia to a staggering 14 millionⁱⁱ.

So given all this it’s not surprising that almost one in five of us are struggling with credit card debt.ⁱⁱⁱ 

Getting to grips with your existing debt…

If you’ve realised you might have a problem with your credit card debt, it’s time to take back control. Sit down, take a deep breath and work out a step-by-step plan.

• Stop all but essential spending on your credit card. Try and get by without your credit card and use cash wherever possible while you work on your plan. You could even set yourself a challenge not to spend any money for a week!
• It sounds basic, but start by listing how many cards you have and what you’re paying for them in interest.
• If you have more than one card, start chipping away at the low-hanging fruit. Consider paying the card with the highest interest rate off first or if the rates are similar, work on clearing the smallest debt.
• If you can’t pay a card off in full, see if you can pay more than the minimum each month to reduce your balance more quickly and save on interest. It could be worth setting up a direct debit on your payday to pay a fixed amount.
• Once you’ve paid off a card, close the account and work towards having a single card to help make your finances easier to manage.
• If you feel that your interest rate is too high, you could consider transferring any remaining balance to a card with a lower interest rate or rolling the debt into an existing personal loan or mortgage, these tend to have lower interest and fees. Many providers offer great rates to consolidate, but make sure you pay the card off during any honeymoon period with the new provider so that you don’t start accruing interest. Check the fine print—what interest rate will you pay after any promotional period ends? You don’t want to just kick the can down the road.
• If all else fails, don’t be afraid to ask for help from your credit provider. There may be a way you can work out a spending plan that takes into account your financial circumstances.

…make sure you don’t build up more credit card debt…

Congratulations. You’ve consolidated your debt, set up a direct debit, closed a few cards and set yourself well on the way to pay off any remaining debt.

But how do you make sure you don’t fall into the same credit trap again? It’s all about developing more healthy financial habits.

• Reduce your credit card limit to take temptation off the table.
• Try not to use credit to pay for the basics like food, groceries and utility bills. See if there are any ways you could adjust your household budget or make savings elsewhere so you’re only using credit as a last resort.
• Avoid cash advances because they may attract higher interest rates.
• Be wary of store cards and any fees you’ll pay – they are just another form of credit card.
• Keep track of your spending

…and take advantage of credit card reforms

The good news is that the Government is introducing reforms on 1 January 2019 to help Australians manage their credit card debt.

• You can cancel your card or lower your limit online for all new accounts.
• You won’t be charged any back-dated interest.
• And you’ll be assessed on your capacity to repay your debt when you ask for an increase.^iv 

Once the credit card’s sorted, it could be time to move on to any other debts you might have. Come and speak to us about taking control of your overall debt.

i Australian Securities & Investments Commission, REP 580 Credit card lending in Australia, July 2018, The credit card market in Australia, section 81, pg. 17, https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-580-credit-card-lending-in-australia/

ii Australian Securities & Investments Commission, REP 580 Credit card lending in Australia, July 2018, Snapshot of the market, 2012-17, section 92, pg. 20, https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-580-credit-card-lending-in-australia/

iii Australian Securities & Investments Commission, REP 580 Credit card lending in Australia, July 2018, section 99, pg. 24, https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-580-credit-card-lending-in-australia/

iv National Consumer Credit Protection Amendment (Credit Cards) Regulations 2018, Schedule 1 – Amendments, https://www.legislation.gov.au/Details/F2018L00504/Explanatory%20Statement/Text

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First published December 2018