Aussie Finance Blog

Australian personal finance news, tips and advices.

Contactless Payments: How Do They Work?

by

Are you someone who absolutely hates how long it takes to make a transaction using a credit or debit card? Do you worry about card fraud a lot? If so, you will love contactless payment systems, which involve the use of contactless cards, stickers, key fobs, mobile devices, and wearable gadgets.

In a nutshell:

  • It is secure. You don’t need to hand over your card to the cashier. For the entire transaction, the card never leaves your hand.
  • It is fast. You don’t need to enter a PIN or leave a signature for purchases under $100.
  • It is easy. You just need to hold the card close to the terminal.

Contactless payments make life a tad easier for the average consumer.

History

Contactless cards have been available in Australia since 2006 but it only started to gain traction in the last few years. From the 7.6 million cards issued in 2010, the number grew to 18 million in 2014. With more and more retailers accepting contactless payments, the total number of contactless cards in Australia should reach 33.9 million in 2019, Timetric predicts. ... (read more)

What are Credit Card Instalment Plans?

by

Several different credit cards let cardholders pay off a portion or some of their outstanding balance through an instalment plan. These payment options break down your balance into monthly instalments spread over a fixed time or predetermined rate. For example, if you had a $1,000 balance and set up an instalment plan over ten months, you’d pay $100 per month instead of paying it all off at once. This is a basic calculation used as an example only, it does not include the addition of interest to the amount borrowed. ... (read more)

Contactless payments statistics in Australia

by

Last month I published an article about contactless payments and it seems like it’s a hot topics nowadays because Westpac released its Visa contactless payments statistics for 2017.

They claim that Visa payWave contactless payments increased to 325 million in 2017, which is a 25% uplift compared to 2016. There were 67 million more payments in 2017 than the year before.

In the first month of 2017, Visa reported more than 24 million contactless payments, which by the end of the year increased to over 33 million.

According to Westpac, contactless is the preferred payment method in over 90% of purchases and contactless generated more than 68% of the Westpac Visa cardholders’ total spend.

It’s also interesting to see that St.George Bank (which is owned by Westpac) has higher contactless usage rate than Westpac. The ratio of contactless payments was 95% for St.George Bank customers, while 81% for Westpac customers, which clearly shows the demographic differences between the two banks’ customers. Also, Westpac customers spend 40% more on contactless credit card payments than debit card payments, which shows that customers are comfortable to use contactless payment for more expensive purchases.

It seems like that the fast food industry is the leader in contactless payments (98%), followed by other kind of restaurants (96%), grocery shopping and discount stores (both 93%). Healthcare related payments had the lowest contactless ratio in 2017, only 59%.

There are quite a few brand and technology names in the contactless payments system but the two most widely used technologies in Australia are Visa payWave and Mastercard PayPass (a.k.a. Tap & Go).

I look forward seeing the 2018 report next year but there’s most likely an upper limit for contactless payments and they will never reach 100%.

Here’s a link to the Westpac contactless payments article.

What is a Black Credit Card?

by

Choosing the right credit card seems more complicated than ever thanks to a competitive financial marketplace and diverse product developments. Fortunately, Australian banks provide credit card options tailored to suit individual requirements. Banks generally differentiate their premium credit card options according to colours such as platinum, gold or black, while lesser cards are not as imposing or opulent in appearance. Most banks in Australia and around the world advertise their black card as the premium product.

What this realistically means is that black credit cards have a higher spending limit. Black cards also come with fairly steep annual fees, greater opportunities for points rewards and a whole bunch of other perks and enticements to sweeten the deal. Banks analyse spending and repayment data when ascertaining customer value, with responsible spenders in the higher wage bracket identified as prime candidates for a black credit card.

 

The original black card

Every bank now has its own black credit card version, although the term ‘Black Card’ was the focus of a trademark dispute between competing financial institutions a few years back. It may therefore come as a surprise to know that the original black credit card is actually known as the American Express Centurion Card. This most prestigious of all credit cards is in a league of its own, and although informally known as the Black Card, bears little resemblance to other black credit cards.

For starters, the American Express Centurion Card is invitation-only, and is reserved for mega-rich individuals. Annual fees cost several thousand Dollars and card holders have no spending limit. One investor used their AMEX Centurion Card to purchase an artwork at auction valued at US $170 million.

 

Suitability for a black credit card

As expected with a premium product, black credit cards offer features that will result in value and savings if used wisely. There are fees involved, and although prestigious, a black credit card can be the wrong solution in the hands of a spendthrift, or when used as a means to escape from financial hardship. Therefore, it’s important to know if you really do require a black credit card. There are some questions worth asking:

  • Is your present credit limit too low for your needs?
  • Do you pay off your credit card regularly?
  • Do you require the features of a black credit card?
  • How many credit cards are you using at present?
  • Have you researched black credit card options?

 

Features of black credit cards

Some investigation is required before choosing a black credit card. Features and special offers are moving with the times and banks are eager to tap in to the wealthy market sector. There may be more room to negotiate when applying for a black credit card so don’t be afraid to ask for special treatment from your bank manager. Here are some black credit card features worth considering:

  • High credit limit of up to $100,000 in some cases
  • High yielding rewards and points programs
  • Free insurance cover
  • Flight and hotel upgrades
  • Complimentary hotel accommodation
  • Complimentary access to premium airport lounges
  • Personal concierge services
  • Exclusive promotions and invitations to special events

A black credit card is most useful when used for major expenses and purchases. People whose occupation requires extensive air travel, or those in the business of buying and selling on a large scale will find a black credit card invaluable, and indeed quite profitable.

 

Black credit cards offered by Australian banks

Australians love to accumulate frequent flyer points and miles, along with other rewards courtesy of their credit card. Australian banks entice customers with special introductory offers, low interest rates, bonus points and miles, and a host of special rewards. Here are a few (not all) black credit card offerings from Australian banks.

If you’re interested in black credit cards issued by banks in New Zealand, I suggest you start with a comparison site, like creditcardscompare.co.nz.

Please note that the credit card offer details were checked on 18th November 2016 and the banks might change the details, so the below information is just a guideline, not accurate product information!

Westpac Altitude Black Credit Card

Exclusive Offer: 100,000 bonus Qantas points if you apply before 5 January and spend at least $5,000 on eligible products or services within 90 days. Other benefits include complimentary travel insurance, special concierge services and VIP airport lounge admission.

  • $395 annual fee
  • 20.24% purchase rate (p.a.)
  • 45-day interest free period on purchases
  • $75,000 maximum credit limit

Check details on the product page.

 

Commonwealth Bank Diamond Awards Credit Card ... (read more)

What Credit Score Is Needed To Get a Credit Card

by

In essence, it would seem that getting a credit card is easy. After all, credit card company representatives are out and about on the streets and in shopping malls signing up new customers all the time. However, filling out the form is only the first step, and your credit score will be used to determine if you are actually wanted as a customer. So, what credit score is actually needed to get a credit card?

Credit scores in Australia range from 0 to 1200, with average to good credit scores in the range from 510-725, according to getcreditscore.com.au. Credit card providers take your score into consideration when approving a card, and not all credit cards are the same. In theory you could be confident that your average credit score of 665 will hold you in good stead for obtaining a new credit card, but your application will be rejected if the bank requires a score of 670 or more.

The higher your credit score, the more likelihood of credit card acceptance. A high credit score will grant you the opportunity to choose just about any credit card. A slightly lower score will still leave you with plenty of options. But as we get into the average credit score realm, the chances of rejection increase accordingly.

It’s important firstly to know your credit score. Then you can make enquiries regarding your choice of credit cards from various lenders and obtain one that your credit score matches. Otherwise, the tendency to continue applying for credit cards that are beyond your reach will lead to additional blemishes on your credit score.

 

A high credit score is no guarantee

Even a good credit score is no guarantee of credit card approval, much to the surprise of some applicants. A single previous late payment, or the burden of too much debt in general can limit the credit card application power of anyone, regardless of credit score. Exclusive ‘platinum-style’ credit cards are also difficult to obtain unless you have a long period of good credit history that possibly includes a mortgage, previous credit cards, personal loans, and an overall unblemished history.

In most cases, if your credit score is 700 or above, and you have a clean credit history record for at least a few years, the option of the majority of credit cards will be open to you. Your chances can still be hindered in cases where you already hold many credit card accounts or are stretched financially with other obligations.

 

Investigate credit card options

Average credit in the 600-700 range isn’t anything to be ashamed of, and is usually only the result of a missed payment or two. A lower credit score is also the norm for  a person who has recently commenced using credit. On the downside, there is every possibility that your credit card application will be rejected until your score gets higher. If you are in this group it’s all the more important to investigate your chances of approval before applying, and start by applying only for those cards which meet your credit score range.

If your credit score is below 600, the chances of obtaining a credit card are further diminished, but not impossible. People in this category may have missed payments, had a mortgage foreclosure or been subject to collection agency proceedings. There may still be opportunities to apply for a secured credit card requiring a security deposit, or a debit card using your own money that doubles as your credit card limit. One function of this type of card is to begin rebuilding a good credit history rather than spending money you don’t really have.

 

Some reasons for credit card rejection:

  • Recent late payment or negative finances
  • Prohibitive amounts of ongoing debt or high credit balances
  • A short credit history
  • Too much readily available credit

 

Sometimes a credit card will be refused due to too much revolving debt associated with other cards in your possession. You may be paying your cards off on time every month, but the overall amount of repayments could mean you are closer to the tipping point of financial hardship. A large outstanding balance resulting from a new purchase or expensive