Perhaps you’ve seen people lose control of their finances by racking up credit card debt. All cash advances accrue interest immediately, and big interest at that. It can get out of control, fast.
When used properly though, credit cards are convenient and rewarding; it’s better to pay for holidays with Qantas Points rather than using your after-tax income, right?
Which is the best? Well, I’ve done some research for you! Let’s have a look at the below offer. But first, as usual, I’m going to tell you a story.
When working in the banks in my 30s, I remember a meeting among Departmental Heads. It was just after a property boom and there was some concern that borrowers were taking advantage of their increased equity in their property by slightly increasing their mortgages, in order to pay off their expensive credit card balances.
This might be smart for borrowers, but not good the bankers in Credit Cards’ who got bonuses based on profits. They had an easy fix though; it had to do with how us Australians psychologically frame acceptable habits.
They learned that cardholders were OK if their credit card balance represented around a third of the available limit.
So, carrying a credit card balance of $4,000 on a card that had a Limit of $6,000 seems irresponsible. But carrying a balance of $5,000 on a Card with a Limit of $15,000 sounds OK.
For a long while, increasing the limits on our clients’ credit cards did the trick, and the bankers were financially rewarded. After a while though, regulation crept in, and banks could increase customers’ credit card limits only if the client had specifically requested such.
The responsibility of any bank and all its officers is to maximise profits for shareholders.
Us Credit Advisors are bound by legislation to provide consumers with choice and expert advice – our industry has come a long way!
But I’m not sure that the 3 out of 10 people who still deal directly with a bank understand that they are being sold to by the cowboys of financial services, who escape Best Interest Duty laws as they are defined as product-pushers, not advisors.
For those who say it’s too hard to leave their current bank, well that’s not by accident. Whether 7 is heaven or 8 is great, bankers are trained to sell you several products – what we called ‘throwing out anchors’. It makes you more ˜sticky’.
Credit Cards and insurances work OK, but I always found that kids’ bank accounts work the best.
The more products you have with your bank, the more familiar you are with them, the greater the perceived sense of loyalty you feel, and bingo, the less price-sensitive you become. It’s simple, really.
The NAB Qantas Signature Card gives you 1 Qantas Point per $1 spent, which if you don’t know, is awesome.
It’s DOUBLE the Qantas Points I get from my CBA Diamond card.
Many banks offer a card with sign-on Qantas Points, but the NAB card has an offer for those willing to refinance a loan to them. The cards’ annual fee of $395 is waived as you’ll be under the Choice Package. But the best bit is:
For joint borrowers, you can each get your own free card (not just one and then a ‘Supplementary’ Card).
This means that you’ll EACH get 120,000 Qantas Points.
This is in addition to their $2,000 Cash Refinance Rebate.
The catch here, to get 2 batches of points, is that you’ll EACH need to have an income to show you can service your own card.
My own investment property loans sit with different banks all for good reasons (often nothing to do with rates or rebates).
But I did just refinance one of them to NAB to snag the cash and Qantas Points. I’m using the points to fly to the Gold Coast.
When I arrive at Coolangatta Airport to get the keys for my hire car, I will not be one of the suckers paying an extra $38 a day for gap insurance, because if I pay for the car with my NAB card, I know I’m covered.
Maybe before trotting off on holidays, you should Google your current card and read the PDS for all the details.
Coming Up: When to buy in a Pty Ltd, in-species non-concessional contributions to facilitate SMSF acquisitions, when to avoid offset accounts, what I think will happen to property prices around Easter ’23, the best keywords to use when searching for property, which banks to borrow from and in what order, Land Tax secrets, how to name your business.
I have a simple 1-page form for you to complete over the break if you find the time, in case you wanted me to calculate what’s possible for you in the big, bad 2023. Send me a message and I will organise one to be sent to you to look at and fill in over the break.
Merry Christmas to you all, I hope you have a lovely break ~ see you on the other side!
Jason C. Khoury, JP, Financial Strategist, iChoice Managing Partner