Ditch the credit card? Why it’s time to switch to debit

Thanks to the government’s brilliant decision on credit card surcharges and the Reserve Bank acting on it, I’m now going to be charged an extra $75 a year on top of my existing $175 card fee. I’m with BankSA, a subsidiary of Westpac. The bank says the only way to avoid such high fees is to abandon the joint credit card I have with my husband and each get a new card costing $7 a month. That’s $84 a year each, and we would have to apply separately and meet the bank’s lending criteria.

I have never failed to pay the balance in full. We are age pensioners so we may not even qualify. We use debit cards for everyday purchases and the credit card for scheduled bills, travel and emergencies. To cap it off, the supervisor asked whether I really needed a credit card. Is this really how banks now regard older customers who have spent a lifetime paying their bills on time?

This is another unintended consequence of abolishing card surcharges. The cost of processing card payments does not disappear – somebody still pays it. Merchants will try to recover it through higher prices, while banks will look to fees or reduced card benefits. There is a growing argument for using a debit card for everyday spending: you are spending your own money, there is no interest bill and you cannot build up credit card debt. Meanwhile, reward points and other benefits need to be weighed against increasingly hefty annual fees.

But credit cards are not redundant. They provide emergency credit, are widely used for hotel and rental-car guarantees, and some offer travel insurance and other protections. For somebody who always pays the balance in full, they remain useful. I would use a debit card for most transactions and keep one low-cost credit card where credit is genuinely useful. Shop around rather than assuming you must stay with your bank. For overseas travel, cards such as Wise are also worth investigating. And I would not be impressed by the bank asking whether you “really need” a credit card. The better question is whether it provides enough value to justify its cost. In your case, perhaps it does – but not at $250 a year.

I have been living and working overseas for a few years but intend to return to my family home in Australia before the six-year absence rule expires, so it should remain covered by the main residence exemption. I have owned it for more than 30 years, so the gain is substantial. I understand that if I sell while a non-resident for tax purposes, I lose the main-residence exemption right back to time of purchase. I have now heard the federal budget changes will deem the property sold on June 30, 2027. If I am still a non-resident then, will I lose the exemption for the entire 30-plus years, even though I was an Australian tax resident for about 90 per cent of that time? This seems extraordinarily retrospective, given I could have sold before leaving Australia without capital gains tax (CGT).

Tax expert Julia Hartman of BAN TACS tells me that is exactly what the second tranche of the draft legislation says.