Make most of credit card changes

INTEREST rates on many credit cards are still around 20% even though the cash rate has been in freefall for years.

Recently, regulations have been introduced to help protect consumers.

There are significant hidden fees for credit card use, such as the interchange rate.

If you had a card issued by Westpac, and used that card in a shop that banks with ANZ, there is a fee charged by the banks to handle the transaction as well as a fee to the merchant. Currently the laws allow a maximum weighted average benchmark of 0.50% interchange fee for credit card transactions, which is calculated every three years. Under the new regulations the percentage will be maintained but it will be calculated quarterly.

Businesses are allowed to pass on credit card costs, but they are supposed to be kept in line with their actual costs of doing a transaction. What is reasonable will still be open to debate, but it should be harder for companies to get away with mark-ups of 4.2-17%, which is what some Australian airlines were adding in the past.

The bottom line is that both fees and rewards should decrease a little, so what strategies do savvy credit card holders need to use to make the best of the changes?

If you share my passion for maximising reward points, look at the real value of the points. With many cards, two points earned gives you just one frequent flyer point, so seek cards that offer one for one.

Next, check out the cap on points. My preferred card, Virgin Velocity, has just introduced a cap of 10,000 points a month. We got around this by replacing our joint cards with individual ones - this takes our combined cap to 20,000 a month.

For those of you who are not paying off your card in full each month, remember that you are paying interest on the entire balance from day one. Therefore, check out Canstar to see what lower rate credit cards are available. There are plenty offering around 9.9%. Switching from a high rate card could give you big savings.

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