2012 - A year of reforms

As 2012 winds down it's worth looking back at some of the initiatives and market developments of the past 12 months, which are helping Australians get their personal finances into better shape.

New Year's Day 2012 saw the introduction of home loan fact sheets. These provide information on the different mortgages provided by the nation's financial institutions in a standardised format. This makes it easier to shop around and compare loans. You will need to ask for a fact sheet though, so if you're in the market for a new mortgage be sure to request one.

Mid-year saw additional reforms take effect including changes to credit cards that allow cardholders to nominate their preferred credit limit on a new card. Over the limit fees are also banned on cards taken out after 30 June 2012 unless you agree to accept this charge.

Best of all, if you take out a new credit card these days, your card repayments will be directed to the highest rate component of the card balance first. This is a welcome step that makes it easier to pay off the debt faster.

July also heralded the introduction of personalised details on your monthly card statement showing how long it will take to pay off the balance if you stick to the minimum repayments. This doesn't always make for cheery reading but it could be the wake-up call that encourages more of us to pay off our credit card sooner. Paying a little extra each month can add up to big savings.

It has also become easier to switch everyday accounts. The federal government bought in reforms this year  that require your new financial institution to do the hard work arranging a changeover of direct debits and credits from your old transaction account to a new one. It takes the headache out of getting the best deal on everyday banking.

For anyone with a home loan, 2012 bought savings on mortgage repayments, with a raft of cuts to the official cash rate - down from 4.25% in January to 3.0% at present. While lenders haven't always passed on the full value of these rate cuts, maintaining your repayments at the old (higher rate) level is a simple way to get ahead with your mortgage.

Falling interest rates have made life difficult for anyone relying on investments like term deposits as a source of interest income. It's more important than ever to shop around for the best return on your spare cash. In a low rate environment there's no room for complacency, and the effort of filling in a few forms with a new financial institution can see you rewarded with a higher return, and that means more money in your pocket.

As this is my final column for 2012 I'd like to wish all my readers a safe and prosperous festive season. Enjoy spending some time with your family, go easy with the credit card and above all, travel safely on the roads. I'll be back with more tips on how to make the most of your money in 2013.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.