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Credit card confusion

Brad used an interest free credit card offer to buy a BBQ costing $3,000. Provided Brad repaid the purchase price of the BBQ within three years, he would pay no interest. Brad calculated that he would need to pay $25 a week into his credit card to repay the debt within three years.

When setting up the account the credit card provider (the provider) said that Brad could check his account statements online at no cost. Brad said he did not have internet access. The provider replied they could post Brad statements, but it would cost $1 a month. Brad did not want to pay $1 a month for statements, so said he would keep a record of his payments himself.

Brad set up an automatic payment with his bank paying the provider $25 a week. After about 18 months Brad contacted his credit card provider and asked to increase his credit limit to pay for some new tyres on his car. The provider declined Brad’s request but said that he had credit available on his account and could use that to pay for the tyres.

Brad purchased the tyres, using the credit available on his credit card. Brad also increased his payments to the provider to $50 a week. However, now that Brad had discovered he could use his credit card for other purchases, he used his credit card for day to day living costs, bringing his balance owing very close to the $3,000 limit.

On the three-year anniversary of buying the BBQ Brad stopped the automatic payment to the provider. The provider told Brad that he owed them money. Brad did not agree, saying he had fully repaid the debt for the BBQ and did not agree to pay the provider any more money. When the provider threatened debt recovery action, Brad complained to FSCL.


Brad said that, when he asked to increase his credit limit, the provider told him he had a ‘credit’ in his account. Brad understood this to mean that he was spending his own money to buy the tyres and the day-to-day living costs. Brad said he had calculated how much he needed to deposit into his account to pay for the BBQ and the tyres. Brad had never missed a payment and said he had fully repaid his debt.

The provider agreed their staff member had told Brad that he could spend the difference between the credit card limit and the amount he still owed on the BBQ. Although the provider could see that Brad was somewhat confused, the provider said that Brad had spent the money and he needed to repay his debt. Acknowledging Brad’s confusion, the credit card provider offered to refund all the interest Brad had paid, $400, and suggested Brad submit a hardship application if he was having difficulty repaying the debt.


We explained to Brad that he had been using the provider’s money to buy things, up to the $3,000 limit, and had agreed to repay that money according to the terms and conditions. As Brad had paid money into his credit card account his debt decreased, and his credit balance increased. We explained that although he could use the ‘credit’ to buy things, the ‘credit’ was not his money. As Brad spent the ‘credit’ he increased his credit card debt.

If Brad had kept paying the $25 a week for the BBQ, and not bought anything else, he would have repaid the debt within three years. Even though Brad increased his payments to $50 a week after he bought the tyres, this was not enough to keep pace with his purchases. In the month before he stopped his payments, Brad paid $150 into his account and spent $210. This meant Brad’s debt increased by $60.

We felt part of Brad’s confusion was that he had not seen his account statements. However, the statements were available online and, if Brad had wanted paper statements, the cost of $1 a month did not seem unreasonable.

We explained to Brad that, in our view, he owed the provider money and should, if possible, start repaying the debt. If he could not afford the payments, then he should let the provider know and apply for hardship relief. We also encouraged Brad to accept the provider’s offer to reduce the debt by $400.


Brad did not accept our verbal explanation and did not respond to a written decision, so we discontinued our investigation.

Insights for participants

The words used in relation to money can be confusing. In this case, when Brad heard the word ‘credit’ he thought the money was his own to spend. Brad did not understand that he was, in fact, spending the credit card provider’s money and would have to repay the debt at some point.

While the meaning of terms commonly used in the financial services industry may seem obvious to those in the industry, this is not necessarily the case for less experienced consumers. We encourage participants to consider their consumer’s level of understanding in all communications.