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Is this Australia's first responsible credit card?

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A new credit card could help you clear your debt faster and save you thousands of dollars in interest.

ING Direct's Orange One card, being rolled out to existing customers next week, is designed to encourage customers to pay off debts faster through mandatory autopay, higher minimum repayments and a fairer interest schedule.

"We take responsible lending seriously and for us that means more than simply validating product suitability and assessing a customer's ability to repay," says John Arnott, executive director of customers for ING Direct.

ING Orange One credit card

Autopay is mandatory and customers will have the option of paying either the full amount due or the minimum repayment.

The card's minimum repayment of 10% is higher than average as the industry standard of 2%-3% "is too low and customers can too easily fall into a debt trap and take years to pay off their debt completely", Arnott says.

With no annual fee, the interest rate on purchases is 14.99% but customers can flick a larger purchase, from $250, onto an instalment plan at a lower rate of 9.99%. The minimum term for an instalment is three months.

And, departing from industry norms, interest on credit card purchases is charged from the date when payment is due.

Australians owe $32 billion on credit cards, according to ASIC's MoneySmart website, which equates to about $4300 per cardholder.

The average cardholder pays about $700 a year in interest for cards with rates from 15% to 20%.

"Few consumers are aware that their purchases accrue interest immediately, so that if the statement balance is not paid in full then interest is actually charged from the purchase date," Arnott says.

"This is quite a punitive model for customers who ordinarily pay in full and get stung with a larger interest charge on the first month that they don't pay in full."

A debt of $4300 on a 14.99%pa interest rate would take more than 12 years to pay off at a minimum repayment of 3%, and cost more than $7000.

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Sharyn McCowen is Money's online producer. She has a degree in journalism from Charles Sturt University, and was a newspaper reporter before moving to magazines and finance.
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