Australians will be protected from running up excessive debt with multiple credit cards under a new federal government plan.
Their ability to repay credit limits within a reasonable period will require assessment in a suite of measures to be introduced before the end of 2017.
Unsolicited offers of credit limit increases will be banned, how interest is calculated simplified, and online options made available to cancel cards or reduce credit limits.
"It is vital that we protect vulnerable Australians from predatory behaviour which seeks to make a quick buck from people's misfortune, and compound their financial hardship," Treasurer Scott Morrison said in a statement on Thursday.
But Labor dismissed it as re-announcement of changes the government promised a year ago, while one small bank said the changes don't go far enough.
Opposition financial services spokeswoman Katy Gallagher said credit cardholders continue to pay the price of the government's inaction by paying more in fees and unfair charges than ever before.
"If the government had delivered on its own commitment last year these reforms would be in place and credit card customers would be getting a better deal," Senator Gallagher said.
ME Bank is concerned the affordability assessment will stifle competition by making it harder for customers to switch cards.
"Most people get into serious credit card debt because of an unexpected event, like loss of employment, which the new affordability assessment won't and can't predict," said head of deposits and transactional banking Nic Emery.
"Improving competition by making switching easier would motivate banks to make better offers to customers, helping to drive down rates."
About $52 billion of debt is spread over 16.7 million Australian credit cards, at an average of $4730 for each card.
Households in the lowest income category have debt equal to four per cent of their annual disposable income, compared to two per cent for those in the highest income category.
"These measures will help protect vulnerable Australians, and ensure financial companies do the right thing by their customers," Mr Morrison said.
