The way we calculate credit card interest is changing

The Australian Government has passed new legislation that will change the way interest is calculated on credit card purchases from 1 January 2019. From 1 January 2019, all Australian financial institutions will need to adopt a new way of calculating credit card interest based on interest-free days. We are getting in touch with you now, to allow you time to contact us with any queries.

What is changing?

At the moment, if you don’t pay off the full closing balance that appears on your monthly statement by the due date, interest is calculated on each purchase from the date the purchase was made.

Under the new laws, if you are currently receiving interest free days and you don’t pay the full closing balance that appears on your card statement by the payment due date, interest on your purchases will be calculated from the day after your payment due date. All subsequent purchases will then be charged interest from the purchase date and your interest free days will only resume once the outstanding card balance is repaid in full.

Transactions that are not eligible for interest-free periods, such as cash advances, will continue to attract interest from the date the transaction was made.

What does this mean for credit card holders?

How you will be impacted by these reforms depends on how you manage your credit card. Take a look at the list below to see which situation best describes you:

  • I always pay off my credit card in full each month

If you continue to pay off your card’s closing balance by the payment due date each month, you won’t be impacted by the new changes, and you will continue to pay zero interest on your credit card purchases.

  • I missed paying my closing balance in full by the payment due date

If you are currently receiving interest free days and don’t pay the closing balance in full by the payment due date, you will only be charged interest on purchases from the day after the due date, up until you repay the total amount owing in full. All subsequent purchases will then be charged interest from the purchase date and your interest free days will only resume once the outstanding card balance is repaid in full.

  • I am currently paying interest on existing purchases

These changes will not immediately impact you as nothing will change until you have paid your closing balance in full and regained the interest-free days. Then from 1 January 2019, if you don’t pay the full closing balance by the due date on your card statement, you will be charged interest on your outstanding balance from the day after the due date, and you card’s interest-free days will only be restarted if you pay the outstanding card balance in full.

Card holders may receive a refund of card interest

Whilst the new legislation comes into effect on 1 January 2019, due to IT system constraints, the implementation of law reforms relating to charging interest on credit card accounts has been delayed until 1 June 2019.

To ensure that you are not adversely affected, we may refund some interest charged between 1 January 2019 to 1 June 2019. This refund is to ensure that you are not charged more interest than if the law reforms had been implemented from 1 January 2019.

Need a hand?

For more information on these changes, view our FAQs.

Or, if you’d like to talk to us about these changes, please feel free to give us a call on 1300 13 22 77 or visit one of our financial services stores. 

Last updated: 18 December 2018

The information contained in this article is only correct at the point of time of publication. It is general information and has been prepared without taking into account your personal circumstances, objectives or needs. Please consider if this information is right for you before making a decision to acquire any product.