Defer repayments on your credit card
What is defer repayments?
It's not having to make the minimum repayment each month and not be charged penalties.
Banks offer these deferrals as temporary financial relief to customers that are suddenly unemployed or have a significantly reduced income.
Because of financial strain on Australians during the COVID-19, credit card providers in Australia are generally offering a 3 month deferral on repayments to customers that are financially impacted.
Besides being impacted financially, to be eligible for deferrals a customer's account must not currently be in arrears.
Then, after the 3 month deferral period the minimum monthly repayment requirement may possibly be reinstated or the deferral extended.
Which banks are offering deferral payments?
Most Australian credit card providers are offering their customers the defer repayments but at different degrees.
For example, American Express, Citibank, Commbank, Westpac, ANZ and NAB are all offering a form of deferral payments to their customers financially impacted by COVID-19.
However, Westpac is waiving all fees and accrued interest for its customers. While NAB has not fully deferred payments and instead reduced repayments of 0.5% of the closing balance or $5 (whichever is greater).
Citibank has stated on their site that they won't be reporting any missed payments to the Bureau, while Commbank has stated they still will report them to the bureau.
Will I still be charged interest during deferral payments?
Generally, all credit card providers are waiving late payment fees. But only some are going the full mile by also waiving interest accrued on balances.
For example, Westpac is not charging interest on existing or new credit card balances for its COVID-19 impacted customers.
But overall, yes the majority of credit card providers are still charging interest on credit card balances.
Switch to a low interest rate credit card
A deferral payment typically means that a customer's balance is still incurring interest if the full statement balance is not paid off each period.
The standard credit card has an interest rate of around 21% p.a. Getting one of the best low interest rate credit cards could then halve your interest rate to a rate between 9% to 12% p.a.
Snap up a 0% balance transfer offer
Snapping up a balance transfer offer means you can get 0% interest on a credit card balance for the term of the offer. But you will have to make minimum repayments.
The good news is that at least if you do a balance transfer you can avoid the accrued interest for sometimes up to 26 months.
Plus, among the best balance transfer cards in Australia, you can find offers with no transfer fee or no annual fees.
Cash in your reward points
Now is a probably good time and opportunity to check your reward point earnings.
Dive a little deeper into the reward scheme's details and see if you can redeem your points for cash back. At least, this way you can credit it back to your credit card to reduce the balance and the interest charges.
Apply for Financial Hardship
If your financial situation is bleak and looks to continue that way past 3 months, then there's the option to apply financial hardship.
Each retail financial institution has a financial hardship team that is there to assist customers during financial difficulty.
The financial hardship teams have the authority and ability to defer payments for a longer-term, extend loan terms, freeze interest and more.