Kris is otherwise engaged in the Melbourne CBD today, doing some research for the November issue of Australian Small Cap Investigator.
He’ll be back soon, but not soon enough to write today’s Money Morning.
So while he’s away, you’ll have to make do with what I’ve got for you…
Jetstar announced recently plans to launch its own credit card. This will allow successful applicants to accumulate ‘Jetstar Dollars’. Just by using the Jetstar MasterCard.
According to Jetstar Chief executive Bruce Buchanan, “We aim to do for credit cards what Jetstar did for low fares airline travel in Australia when we launched back in 2004.”
So, based on that statement, when you open your Jetstar credit card statement it will snarl at you like the Jetstar cabin crew.
Supposedly, this card will benefit the consumer. Not only by offering an ‘everyday low rate of 10.99%’ but also because you can cash in your ‘Jetstar Dollars’ for Jetstar flight vouchers.
How do you accrue these amazing benefits? I hear you ask.
Well, there will be two cards available. Customers will receive one cent in Jetstar Dollars for every dollar spent on ‘everyday’ purchases on the Jetstar MasterCard. But reader, if you go for the Jetstar Platinum MasterCard, you’ll receive two cents for every dollar spent.
Wow! (insert sarcasm font here)
How about we look at it this way? I had a quick a look at a return flight to the Gold Coast from Melbourne. For the date I picked, it averaged about $400.
Now, for my fare to be ‘free’ using Jetstar Dollars I would need to spend $40,000. That’s more than a yearly wage for some people.
However, if you were to use the Jetstar ‘Platinum’ MasterCard, you’d only need to spend $20,000 for that fare to the Gold Coast to be free.
However, there is a maximum cap on how many Jetstar Dollars you can earn per year. On the Jetstar MasterCard, you can accrue a maximum of $500 Jetstar Dollars.
It hardly seems worth the fuss.
See, Jetstar is not alone in their credit card program. They aren’t the first company to realise there’s money to be made out of your debt.
Sometimes it seems every retailer and every company has a credit card rewards program for you to be part of – David Jones, Myer, Qantas, Safeway, Coles, BP. Even Holden have a credit card program.
Oh, and not to be outdone, Virgin Blue is about to launch a Virgin Blue credit card as well.
But most people rarely spend enough to use the benefits regularly. Have you ever gotten more out of your Fly Buys program than movie tickets?
Now why would these retailers and airlines want to be involved in credit cards?
Simply put, there’s money in it. For the retailer and for the bank they partner with.
In August this year, Australian’s had a combined credit card debt of $44 billion dollars. That’s an average of $3,000 per person.
The banks have turned credit cards from an occasional use, into an everyday necessity.
You think nothing of paying for your groceries on credit, or using your credit card to buy petrol. What about just quickly topping up your online TAB account using a credit card? It is the spring carnival after all.
Even I can remember the signs in shops that used to say “Don’t ask for credit as refusal may offend.” These days they can’t give it to you fast enough.
Credit cards have become such a big part of our lives that even the humble tuck shop at some primary schools is accepting them.
No longer do you send your little ones off to school with change rattling around in a brown paper bag. Now you order their lunch online in the mornings, and an outsourced business delivers it to your kid’s school at lunch time.
Guess how you pay for it? Yep, online with a credit card.
Apparently this system makes life easier for the parents. At the same time, it makes us all the more reliant on credit cards.
Think about it, pretty much everything you order over the internet requires the use of a credit card.
iTunes? Just to set up an account you need to link it to a credit card.
Hotel bookings? Credit card details must be given to confirm the booking. No plastic card, nowhere to sleep for you.
And, believe it or not, I’ve even made hair dressing appointments where I’ve had to leave credit card details. That way, if I don’t show up they can still get some money from me.
And so can my bank.
If we think back, it wasn’t so long ago, that debt was an embarrassment.
However, over the last 25 years, debt has been transformed, and become a way of life.
Credit, in the 1980′s, was hard to get. Not only did we have record high interest rates, but loans from the bank weren’t widely available.
These days, credit has become extremely easy to get.
There’s even talk about changing consumer credit laws, so the banks can pretend to be responsible lenders.
We know that’s not going to happen.
The banks make too much money out of you being in debt.
So, while there is money to be made from debt, both banks and other companies will want to get their piece of that $44 billion credit card debt.
Regards,
Shae Smith
Assistant Editor
60-Second Market Round Up
by Shae Smith
The S&P/ASX200 closed at 4,757.00 up by 23 points. The Australian Bureau of Statistics releases its labour force report for October today at 11.30, so watch the markets for a reaction.
On Wall Street the Dow Jones Industrial Average has continued to rise finishing at 10,291.26, a gain of 0.43%. News of Toll Brothers [NYSE: TOL] forecasted earnings are higher than expected and a step up in output from China kept the Dow in positive territory.
In the UK the FTSE100 increased overnight to 5,266.75 up by 36 points. Read more about what happened in the UK here.
The Nikkei added 0.01% yesterday, finishing at 9,871.68.
Spot gold reached a new high of $1,118.70 overnight. This marked gold’s longest gaining streak since 2006.
The price of gold in Australian dollars is trading at $1,117.42, while in US Dollars it is trading at $1,201.40. And the price of silver in Aussie dollars is $18.93 and in US Dollars it is $17.60.
The Aussie dollar versus the US dollar is trading at USD$0.9303, and against the Japanese Yen JPY83.59.
Crude oil closed overnight at USD$79.21
For the biggest movers on the market yesterday click here…
{ 3 comments… read them below or add one }
If we try
The old get old
And the young get stronger
May take a week
And it may take longer
They got the guns
But we got the numbers
Gonna win, yeah
We’re takin’ over
Come on!
Yeah!
Your ballroom days are over, baby
Night is drawing near
Shadows of the evening crawl across the years
Ya walk across the floor with a flower in your hand
Trying to tell me no one understands
Trade in your hours for a handful dimes
Fair points Shae – I suppose lower interest rates do make debt less burdensome, but people need to understand – as you have pointed out – the massive amount of money you have to spend to make their reward programs pay off.
I have had my credit card for about 6 years and I never cashed in my reward points. Then I noticed I had enough to get a GPS (the catch was that I had to then pay an extra $70 delivery!!!). So I instead cashed in my points for money ($250) and put it towards my iPhone with GPS Application on it.
I dont know how much money I had to rack up on my CC to get that $250 off the bank – but I would be guessing somewhere close to $100K (I bet a lot of money on NRL football games and use my CC to make the deposits).
Just started to read Ben Elton’s latest book ‘Meltdown’. A lovely parody of the rise and fall of the generation of debt driven junkies and their money for nothing scams and meaningless lifestyles. Best line so far is the central characters view on house prices in London’s expensive Notting Hill. When he purchased it (from a rock star which incidentally added a million to the price for the kudos it gained) he didn’t care what the price was, he was intent on buying in and firmly believed in the saying that “A house is worth what you pay for it. Now he was actually discovering that in fact a house was worth what you could sell it for.”
Not really recommended bedtime reading for all those new FHB’s as they watch the Reserve crank up rates.