Steve2009

They get a small wedge in the form of interchange fees but I reckon it would barely cover their costs. A lot of that interchange fee seems to go to loyalty programs.

DeadVim

Yup, the calculators are good, you can really visualise the effect paying an extra few bob a month will have

BadgeIsBack

Some places will give you a line of credit in addition to the initial borrowings for your house, (naturally you might have borrowed an arbitary amount) either attached to it, or in a seperate account.

We got a 25k line of credit which we didn't really want to touch, and we did not ask for it.

What does happen I notice is that when the mortgage payment goes in but before the mortgage interest is debited that these funds show as balance...
and are infact available - it is important to not spend this money....I should imagine that within a few months a letter would arrive asking you to put it back and notifying you are behind...

ABCDiamond

That website you mentioned does specify two things:

1. The main benefit achieved using this method [you need to set your new fortnightly payment amount at exactly half your current monthly payment] is because you will be tricking yourself into making an additional annual monthly repayment, and the advantage of doing this is quite significant.
2. Beware: if you approach your bank manager and tell him you wish to switch from monthly repayments to fortnightly, he/she may use the following calculation: (Mthly Pmt x 12) / 26

So you can see where the real difference is, ie: in making extra payments.

ABCDiamond

When I had my business, I was paying the banks about 2-3% of each and every Credit Card transaction. Is that what you refer to as interchange fees ?

Less than 0.5% goes into loyalty programs, so they do appear to keep a decent margin on every transaction.
eg: If I spend $4,000 in a month, the shops I spend in could be paying a total of about $80 to the Bank. Some shops only pay about 1% (Woolworths, Coles etc), but others could well still be around 3%. My last dealings with this were in 2002, and I am not sure if the banks have 'reduced' their charges...

Steve2009

Many people take a cut out of that small fee, the acquiring bank, the issuing bank and the service providers. About 12% would be cheap for this kind of unsecured credit, meaning the credit card providers would be barely breaking even if they were giving 30 days free credit on these transactions and getting 1% in interchange. I think from experience 1% would be quite a big fee for issuing banks.

ABCDiamond

But don't forget, the retailers normally cover the 30 day free credit. We always waited a fair time before we got paid by the credit card company. Not sure if it was about 30 days or thereabouts.

The banks are getting the money for basically nothing.