In terms of the credit card market, the big banks have begun 2015 as they ended 2014. Competing fiercely.
Both ANZ and Westpac are currently offering a 0% interest rate for borrowers transferring debt to one of their credit cards. BNZ's offering a 1% balance transfer rate and Kiwibank 1.99%. ASB's the odd one out among the big five, with no such offer currently being promoted.
"If you’ve max’d out on other credit cards, store cards or personal loans, a balance transfer could be right for you. Right now, we can help you get your finances under control with a special rate of 0% p.a. for 12 months on outstanding balances that you successfully apply to transfer to any Westpac credit card. To help you get your debt paid off faster, payments made to your Westpac credit card will be applied to the transferred balance before any cash advances and other purchases," Westpac says on its website.
ANZ's offering both a 0% interest rate for six months on a transferred balance, and 0% interest for the first six months on purchases.
The offers come hot on the heels of Christmas and with consumer debt at a record high and growing strongly. The latest Reserve Bank sector credit data figures show consumer debt rose 6.8% in the year to November 30 to $14.875 billion. That growth rate was slightly down from October when it grew 7.2%, the fastest annualised pace since December 2005. And as credit rating agency Fitch noted this week, New Zealand household debt has risen to 156% of disposable income from 152% in 2011 and is "high" by international standards.
Despite the enticing balance transfer offers many actual credit card purchase interest rates are in the teens or even up around 20%, which appears staggeringly high in a low interest rate world. See all credit card rates here.
There is, however, some regulatory change afoot. As reported by interest.co.nz on November 5, the Government is seeking feedback on incoming consumer credit regulations that will prescribe both cost of borrowing details lenders must make publicly available, and what goes in a minimum repayment warning on credit card statements.
And see our warning on credit card minimum payment amounts here. And here's our look at which banks have been growing credit card marketshare, and which ones have been losing it.
19 Comments
Judicious use of balance transfers can make borrowing cheaper than a car loan or mortgage topup.
One technique is to use 2 or 3 cards and always have one on zero balance, then transfer balances every 12 months when zero interest period ends. However some banks require you to make at least 1 transaction every 3/6/12 months which of course will be at normal interest. Others don't require this.
Credit Card product managers want to charge higher interest (i.e.19.95%) on the purchases as all the repayment made will be used to repay the Balance Transfer first, so it's a big trap. A smarter way is to apply credit cards from different banks, get the balance transfered from one to the other, and cash out the credit balance to repay your high cost debt, i.e. home loan. You just need to pay the minimum 2% (or 3%) each month. In this way, you will use the free money from the Bank for 12 months without paying any interest. But do remember to repay in full at the end. Let's all do that, and make banks no P&L benefit.
"To help you get your debt paid off faster, payments made to your Westpac credit card will be applied to the transferred balance before any cash advances and other purchases" should attract ComCom for misleading advertising.
Total debt would be repaid faster if repayments are applied to interest accruing portion first.
Probably not as it looks it is not part of their actual advertising materials. Probably a rogue employee or an embelishment by the author?
http://www.westpac.co.nz/credit-cards/balance-transfer-calculator/
"The everyday Credit Card Balance Transfer rate of 5.95% p.a. will apply to balance(s) transferred to your Westpac credit card until that transferred balance(s) is paid off."
"Payments made to your Westpac credit card will be applied against balance transfers before all cash advances and other purchases, but after all charges and interest that has been accrued."
The quote in my story comes from Westpac's website here - http://www.westpac.co.nz/credit-cards/balance-transfer/
Does nobody follow the swap rates anymore? we are 7 points of a inverse yield curve (were long term rates become cheaper than short term).
Banks are rorting the borrowers at the moment - the 5 year rates got a long way to fall yet to catchup to the falls weve seen in the 5 year swap rate market.
We have coverage of swap rates here everyday (http://www.interest.co.nz/bonds/73596/swiss-national-bank-move-sends-ri…-) and often in 90@9 too, which returns on Monday.
Surely a business is allowed to charge high margins if they wish. (ComCom excepted)
Isn't that what pays shareholders their dividends.
If the market doesn't want to pay the asking price, the bank will soon notice as demand drops, and will then lower the price accordingly.
Until then, they are in the business of making money.
Also Banks make good money each time you use your Credit Cards vai intercahange fee (depends on what bank is doing the payment processing for retailer).
Was anyone aware there is a move to get rid of EFT-POS cards and move everyone to Debit or Credit cards so banks and card companies (Visa, Mastercard) can earn a commission whereas Credit Card companies don't earn anything on EFT-POS?
(EFT-POS uses the banking interpayment system whereas Debit Cards use the Credit Card payment system).
Which is I assume why we have the wave and go but not on an eftpos card, CC only. I'd like to get rid of it I think its dangerous but you cannot get non-wave card now.
What I do find interesting is lots of small businesses now dont take CC, so while the banks love the extra margin they cabn gouge they are getting stymied by it.
What is annoying me is when I buy stuff abroad the CC not only makes a gain on the US to NZ but also charges me a % of value as well. Of course if the banks can do that they can collect GST just as easily and they probably should as well.
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