Credit Cards

Beating credit card bankruptcy in Australia

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 16 Nov 2009 02:11:00 +0000

Increasing numbers of people are finding it difficult to manage their finances, including their credit card debt.
Part 9 of Bankruptcy Act introduced in 1997 aimed at keeping people out of bankruptcy.
Debtors arrange to partly repay creditors over time debt agreements are one stop short of declaring total bankruptcy for the increasing number of people who can't pay their credit card debts, personal loans and bills.
A debt agreement under Part 9 of the Bankruptcy Act, allows debtors to strike a deal with their creditors to repay less than the full amount at an agreed weekly rate over a period of time – without any additional interest. It is an option for people with unsecured debts of less than $77,021 and after-tax income below $57,765.
Now big creditors seem to be getting tough and, according to debt agreement administrators, some are insisting on unrealistic returns from insolvent people.
Part 9 agreements were introduced in 1997 following widespread public concern about young people in particular having to file for bankruptcy over consumer debts such as small credit card debts or even mobile phone bills.
Since then an industry of debt agreement administrators has grown up, often relying on heavy marketing and with trading names such as Debt Assist, Debt Relief and Debt Busters.
They specialise in organising agreements and approaching creditors who vote on each proposal. Fox Symes is a market leader in the industry, filing about 300 agreements a month.
"Some of the big lenders have totally unrealistic expectations," says Deborah Southon, director of Fox Symes.
"People are coming through now with up to $78,000 in consumer debts," Ms Southon says. "You can't pay that back in less than five years and probably not at much more than 40¢-50¢ in the dollar."
Recent amendments to the Bankruptcy Act enshrine the principle that an insolvent person's debt agreement proposal must be affordable and therefore sustainable.
Debt agreement administrators say Westpac and St George Bank are among big lenders voting down debt agreements based on the debtor's ability to repay.
The administrators report a noticeably harsher approach from Westpac and St George compared with a generally supportive approach of the Commonwealth Bank and National Australia Bank in particular.
Some say that St George is telling them no less than 65¢ is acceptable, while Westpac is said to be voting down agreements that return less than 70¢ in the dollar, regardless of the circumstances of the debtor.
Penny Doube, a debt agreement administrator based at Tarragindi in Brisbane, says that on average her agreements involve an insolvent debtor repaying about 50¢ in the dollar over three years.
Ms Doube says St George has informed her that its minimum acceptable return is 65¢.
"St George have always been difficult to deal with," Ms Doube says. "They are not fond of Part 9s."
Administrators typically negotiate agreements that return between 40¢ and 80¢ in the dollar over three to five years. For that, they charge an upfront fee that usually ranges between $600 and $1500 and an ongoing commission.
Ms Southon says each agreement has to ensure that the rent or mortgage is paid, plus provide for utilities, food, essentials, children and the occasional medical visit.
Under the new voting rules, big creditors have increased power and cannot be easily outvoted.
"If St George is your majority creditor, then it is 'shut the gate and file now for bankruptcy', because they are not going to agree to anything," says one debt agreement administrator.
Melbourne debt agreement administrator Melissa Treherne says she is being sandwiched by tough creditors and the new rules, which require her to certify a debtor can afford repayments.
"The new rules are good, they have really cleaned things up but some of the creditors are just not looking at the budget of these people," says Ms Treherne.
"They say they have a new rule, nothing under 55¢ for example, and they won't be flexible about time or rate of return."
A Westpac spokesman says 70¢ "is one of its highest repayment guidelines" and it does apply lower proportions on a case-by-case basis.
A spokeswoman for St George Bank says the bank assesses each proposal individually.
"Most importantly, customers' specific circumstances are taken into consideration, and the final decision is not solely based on the return to the bank."
Digby Ross, the Queensland insolvency registrar, says the system requires goodwill by all parties in the industry if it is to succeed, including the big creditors.
"The major creditors have generally been very supportive, right through (the reform process)," said Mr Ross.
"Yes, definitely, it needs goodwill by creditors to succeed and the contact we've had has been positive." Source: Sunday Mail

How to send your Australian Banks Broke

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 29 Sep 2009 04:45:00 +0000

As the ANZ folded last week to pressure on penalty fees, it brings up a question. How dependent are Australia's banks on fees and charges, and how long could they avoid going under if they could no longer charge these fees, and up them at will?

Have you been caught in the ANZ money trap?

I was an angry victim of ANZ's penalty fees just last Christmas.

I have been caught several times with a $40 penalty fee from ANZ. Often these fees were subtracted on the same day that new funds hit my account, and on some of these occasions I believe that the bank had these funds for several days before declaring them. A double ripoff you might say.

But when on Holidays last Christmas I overdrew my account on a EFTPOS card by less than three hundred dollars.

The ANZ charged me over $40.00 for each time I made a draw. The first charge was on an overdraw of less than $10!

This overdrawn amount included the $120 or so "Honour fees". This meant that they charged me nearly 100% interest for a few days! The mind boggles at the actual interest charged on a per annum basis, but it would have been in the Tens of thousands percent interest annualised. As you can imagine I was not well pleased.

How I struck back at the ANZ.

When I rang the bank I pointed out this practice as wrong and I believed unlawful.

The bank officer reminded me that I had "Signed a contract" with the terms and conditions, and that I was stuck with the charges, and that it was therefore legal.

I then pointed out that any contract had to be fair and reasonable, and this obviously was neither, and therefore where I had agreed with the terms and conditions or not, it was unlawful, as it did not meet this implied condition.

I pointed out that they were entitled to charge an default interest in the order of 4% per annum, which is fair and reasonable, and that this would amount to only a few cents. Their charges i said amounted to several thousand percent per annum, and this was I believed predatory interest.

I also pointed out that I had signed nothing. I was given a booklet with the terms and conditions in then, after I signed up for a bank account, and that these charges were not clearly explained to me.

I also pointed out that I was under the impression, and had asked the bank not to allow any overdrawn amount, and because they did, it was their fault not mine, and that had a duty to me to inform me that the amount would be overdrawn and incur penalty rates if I proceeded, and this did not happen. As I had several bank accounts with clear funds in them I could have used another card.

After initially arguing with me they quickly capitulated under the weight of seeming legal argument. I received a reversal of all three honour fees.

One hundred and twenty dollars tax free for five minutes on the phone, I feel was a good investment of time.

In a move that will cost it about $140 million a year, the ANZ abolished 27 fees on personal accounts and cut other account, credit card and loan fees.

I must not have been the only person to complain, and obviously the ANZ was not the only bank to charge these fees.

But I kind of like to think that I was part of the momentum that caused this charge of heart by the ANZ.

If you were one of the ANZ customers who complained as well, thank you. We did a good thing, and saved millions from a nasty surprise.

So will the banks really go broke if they did not charge fees. Of course not. They make billions a years. But they did lose a little icing off the cake.

The ANZ bank and in fact all Australian banks are great services that we cannot live without. They are full of honest and good people. But if you let them they will try it on. Don't let them even think they can with your account.

Plus, all fees will be abolished for accounts of customers on government benefits who have an Access Basic account. If that's you, tell your bank today, and save even more.

Author: Rick Adlam Mr Mortgage

Credit Cards: CommBank launches the first prepaid travel card

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 04 Jul 2009 03:59:00 +0000

Commonwealth Bank last week launched the first multiple currency prepaid travel card.
AUstralia's Commonwealth Bank, in conjunction with MasterCard, launched the Travel Money Card last week, the first prepaid travel card that enables travellers to lock in the exchange rate of up to six prominent currencies on one card, providing anyone who travels with a highly convenient, cost effective and secure way of spending and accessing money overseas.
Available at any Commonwealth Bank branch in Australia, the Travel Money Card is accepted at more than 28 million locations worldwide, including more than one million ATMs, wherever MasterCard is accepted.
Commonwealth Bank Executive General Manager, Retail Products, Mr Michael Cant, said the card would change the way people transact while travelling.
"We are committed to offering products and services that make banking easy for our customers. The Travel Money Card is cost effective, accessible throughout the world and has the flexibility to load and transfer between multiple currencies, which has never been seen before," Mr Cant said.
"The Travel Money Card can be loaded with US dollars, British pounds, Euros, Australian, New Zealand and Canadian dollars so people don't have the hassle of changing money at their destination and can better manage their spending given the card is prepaid and the currency locked in.
"This is a great option for anyone who travels, from backpackers, business and seasoned travellers, or parents preparing their children for their first travel experience," He said.
Mr Eddie Grobler, executive vice president, MasterCard Australasia said that the Travel Money Card provides a global payment solution while travelling.
"MasterCard prides itself on offering its customers convenience and peace of mind when it comes to travelling internationally, and that benefit is now extended to Commonwealth Bank Travel Money Card customers.
"A world first for MasterCard, travellers can now access multiple currencies on the single card and know the card will be accepted across MasterCard's vast global network," Mr Grobler said.
The Travel Money Card enables people to avoid fluctuating exchange rates, international transaction fees and keep track of their spending with 24/7 phone and online support and via SMS alerts. The card attracts a flat ATM withdrawal fee. There is no fee when using the card in-store, online or over the phone, at Point of Sale (POS) merchants, and transferring between currencies on the card does not attract a fee.
Other features of Commonwealth Bank's Travel Money Card include:
*Customers can load their preferred value up to AUD$25,000 or foreign currency equivalent
* Valid for up to three years and reloadable online via BPAY, over the phone, or in any Commonwealth Bank branch in Australia
* PIN protected and signature enabled
* Back-up card provided in case card is lost or stolen. The card is not linked to a personal bank account
* Flat purchase fee of AUD$15.00
* ATM withdrawal fee of AUD$3.50 or foreign currency equivalent
* Users can keep track of their spending from anywhere in the world with support online, over the phone and via SMS alerts
* Those purchasing the card do not have to be an existing Commonwealth Bank customer.
Story from Rick Adlam Mr Mortgage, supplied by the CBA

Credit card cash advances and EFTPOS use rise in Australia

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 21 May 2009 05:06:00 +0000

Credit card transactions, climbed nearly 10 per cent in March, according to the Reserve Bank of Australia (RBA).
Australians spent $18.775 billion on their credit and charge cards in May, up from $17.130 billion the previous month and the second straight monthly increase.
The good news is that the increase in spending was matched by increased repayments, the RBA's says.
Credit-card repayments rose 17.5 per cent in March to $19.720 billion - the highest level since December.
Australians are paying out their credit cards
Total credit and charge-card balances outstanding fell by 1.0 per cent to $44.358 billion, from $44.799 billion in February.
Balances accruing interest rose slightly to $32.689 billion in March, from $32.651 billion the previous month.
By value, credit and charge card purchases increased 9.7 per cent to $17.741 billion in March, from $16.167 billion in February.
A disturbing trend is that cash advances on credit and charge cards increased by 7.4 per cent to $1.034 billion in March, from $963 million in February.
The number of cash advances on credit and charge cards rose by 6.8 per cent in the month.
The number of credit and charge accounts increased by 11,000 in March, while the number of purchases using credit cards rose by 13.3 per cent.
Total credit and charge card balances outstanding rose by 4.3 per cent over the past 12 months, compared with an average of 12.6 per cent over the preceding five years.
Total credit card repayments rose by 11.6 per cent over the past 12 months, compared with an average of 9.2 per cent over the preceding five years.
Total EFTPOS purchases rose to 161.998 million worth $11.213 billion in March, compared with 146.722 million worth $9.912 billion in the previous month.
The value of EFTPOS purchases rose by 18.7 per cent over the past 12 months, compared with an average of 12.3 per cent over the preceding five years.

Credit card chargebacks may save duped Kleenmaid customers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 30 Apr 2009 10:48:00 +0000

A little-known credit card benefit offers consumers protection from financial loss.
The business failure of Kleenmaid has left 4500 customers who have placed deposits on $27 million for goods not delivered may get some relief, if they act quickly. You have only a 75 day window from the transaction to make a claim. Eftpos users are also protected.
It appears that Kleenmaid were trading whilst insolvent, not that this seems to worry companies these days.
But here's the good news. Any customer who paid using a credit card [or debit card ]can use their card issuer's chargeback facility to get a full refund. I knew having a credit card had to be useful for something, and I have used this fact myself when buying online and not getting what I paid for.
Chargeback covers services or goods that have been paid for but not supplied.
If it happens you must notify your card issuer, which will investigate the case.
When it is satisfied you are entitled to reverse the transaction, it will credit your account. Because the bank has to look into the matter, it can take a couple of weeks to get the money back. In the case of Kleenmaid there is not much to look into.
The card issuer will then chase the merchant's bank (called the acquiring bank, in payment system jargon) to recover that money. In the card-payment world, the acquiring bank stands behind its merchant customer and has to make good when the sale of goods or services already paid for does not proceed.
Card companies including Visa, Amex and Mastercard were also reported saying customers should be able to get their money back.
Any consumer whose transaction card carries a MasterCard or Visa logo has access to the scheme debit system as well as to Eftpos.
It gets tricky because access to the two systems is through the same card and the same point of sale terminal.
If you press "credit" when you make a payment you are using scheme debit; if you press "savings" or "cheque" you are using Eftpos. Consumers who use the scheme debit system get the same protection as users of MasterCard and Visa credit cards, including chargebacks.
As we said earlier, it's important to notify the card issuer if a chargeback is required quickly. In most cases customers have 75 days, after which the issuer will not reverse the transaction.
Chargebacks are not just for reversing transactions where the goods or services are not supplied. They are also used to correct duplicate billing, to fix a bank processing error or to deal with fraud in cases where customers did not authorise a purchase on their card.
So lodge your claim and good luck!

Debt relief' made easy for credit card users as more middle class earners declare bankruptcy

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 16 Apr 2009 23:46:00 +0000

Middle class and high income earners are increasingly taking advantage of cheap and easy insolvencies to escape credit card debt and go bankrupt.
Australia is experiencing a boom in insolvency activity and Victoria is the epicentre of the debt crisis. In the three months to March 31 this year the number of consumer debt agreements entered into skyrocketed up by almost 40 per cent, compared with the same period last year. Bankruptcies were also up 16 per cent, with the vast majority of those being non-business related. Personal insolvency agreements, which are generally undertaken by higher income earners who cannot repay consumer debts, jumped up by more than 50 per cent off a low base. The Insolvency and Trustee Service Australia reports that total insolvency activity was up 18 per cent across the nation in the March quarter. But the Victorian statistics are particularly alarming with total insolvency activity up more than 22 per cent. Only Tasmania showed more growth than Victoria in the numbers of people who cannot repay their debts. Debt counsellors say bankruptcy is a relatively cheap and easy option for people who have lost their job and cannot repay their debts."Bankruptcy can be a pretty cheap option if there are no real assets and no capacity to pay," says John Beecroft, an insolvency specialist in South Yarra."We do the paperwork and send it off to the Insolvency and Trustee Service where it is basically a paper entry."
Digby Ross, the official receiver at ITSA, agrees that bankruptcy can be a cheap and easy option for debtors. "It is a fairly straightforward process," says Mr Ross."They have to prepare a one-page petition and a statement of affairs covering their creditors, any property they have, and their personal details."That is filed with us and when it is accepted the person is bankrupt.
There are no court appearances required."A bankrupt person is generally denied credit for three years. A permanent record of the bankruptcy is placed on the National Personal Insolvency Index, an electronic public register. John Beecroft from debt assist says there has been a noticeable change in the type of people asking for assistance in the past few months."When rates and fuel prices were high we were seeing lots of people from the outer suburbs, now we are seeing more from middle class suburbs and above. "People who have used their credit cards to buy shares and had a margin call is pretty common -- or property investments that have gone wrong," said Mr Beecroft. Bankruptcy is a common option for people losing their jobs, he says.

Credit Card love affair wanes for Aussies

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 03 Feb 2009 20:59:00 +0000

Australians are reducing their debts for the first time since the last recession, but questions are being raised about whether it is voluntary or enforced by lenders imposing stricter conditions.
Figures collected by the Reserve Bank show the amount of credit outstanding to businesses and consumers fell 0.3per cent in December to just over $1.9trillion - the first monthly fall since 1992 - slowing what was expected to be a steady rise to $2trillion. Outstanding debt has roughly doubled in the past six years.
Corporations are leading the retreat, with demand for finance for new projects drying up and lenders become more cautious about who they lend to. Outstanding loans to business shrank 1.1 per cent in December, reducing the annual growth rate to 8 per cent, down from 24per cent the year before. The Reserve Bank said some of the decrease "reflected a fall in foreign currency-denominated lending".
Meanwhile, housing debt - which accounts for nearly half of all outstanding debt, or nearly $1trillion - continued to grow, albeit at a slower pace than a year ago. The annual growth rate of 7.6per cent was the slowest recorded in more than 25 years.
It shows that while lower interest rates and the first-home-buyers' grant boost may be supporting demand, existing borrowers are seeking to repay debts at a faster rate.
A Commonwealth Bank economist said it was a bad sign for house prices. "This much lower volume of funds trickling into the housing market means that sales volumes will remain anaemic."

Westpac bank passes on rate reduction to thier credit card customers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 03 Feb 2009 09:39:00 +0000

Australia's first bank was the first bank to pass on the Reserve Bank's 100 basis point interest rate cut to its mortgage customers.
But the real suprise was that Westpac wrer also the first bank to reduce the credit card interest by the full one per cent interest rate also when it announced it will also reduce its 55-day credit card rate by 100 basis points.
The nation's other big banks are yet to announce reductions in either home loan rates or credit card rates, or loans rates to small business, after the Reserve Bank's announcement at 2.30pm (AEDT).

Credit is off the boil in credit cards to business investment

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 02 Feb 2009 09:24:00 +0000

AUstralian consumers and businesses are reducing their debts for the first time since the last recession, but questions are being raised about whether it is voluntary or enforced by lenders imposing stricter conditions.
Figures collected by the Reserve Bank show the amount of credit outstanding to businesses and consumers fell 0.3per cent in December to just over $1.9trillion - the first monthly fall since 1992 - slowing what was expected to be a steady rise to $2trillion. Outstanding debt has roughly doubled in the past six years.
Corporations are leading the retreat, with demand for finance for new projects drying up and lenders become more cautious about who they lend to. Outstanding loans to business shrank 1.1 per cent in December, reducing the annual growth rate to 8 per cent, down from 24per cent the year before. The Reserve Bank said some of the decrease "reflected a fall in foreign currency-denominated lending".
Other figures released yesterday by the banking watchdog, the Australian Prudential Regulation Authority, and analysed by CommSec showed banks with foreign parent companies such as HSBC, Barclays and ING reduced loans and advances to Australian firms and households in December. All of the big Australian banks, excluding NAB, increased theirs.
The chief economist at Morgan Stanley, Gerard Minack, said the figures showed the credit crunch was beginning to be felt domestically. "More to the point, it will likely get significantly worse. Reduced credit flows is part of the reason I expect a severe recession in Australia.
In particular, tight credit points to a major fall in business investment over the next 18 months."
The credit figures are another sign of a slowing economy, which is expected to convince the Reserve to opt for a 1percentage point interest rate cut at its first meeting of the year next Tuesday.
Meanwhile, housing debt - which accounts for nearly half of all outstanding debt, or nearly $1trillion - continued to grow, albeit at a slower pace than a year ago. The annual growth rate of 7.6per cent was the slowest recorded in more than 25 years.
It shows that while lower interest rates and the first-home-buyers' grant boost may be supporting demand, existing borrowers are seeking to repay debts at a faster rate.
A Commonwealth Bank economist said it was a bad sign for house prices. "This much lower volume of funds trickling into the housing market means that sales volumes will remain anaemic."

Credit Card transaction fall as buyers tighten their belts

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 02 Feb 2009 02:58:00 +0000

Australians are turning their backs on credit, gripped by the fear of losing their job as the economic outlook turns increasingly grim.
More economists now believe a recession is unavoidable, if the country hasn't already entered one for the first time since the early 1990s.
Technically, a recession is defined as two consecutive quarters of negative economic growth. Federal Treasurer Wayne Swan won't be drawn on whether Australia will suffer that fate. "I don't speculate about the outcome of the figures," Mr Swan said on Friday. "It's a global recession and we're not immune from the fallout ... It's got much, much worse than anybody could ever have imagined."
The world's largest bank, JP Morgan, has further downgraded its Australian growth forecast, and expects the economy to contract by 0.5 per cent in 2009, a marked change from its previous estimate for a modest 0.2 per cent expansion. "Deteriorating conditions offshore and the worsening credit crunch point to a deeper Australian recession than previously forecast," JP Morgan's chief economist in Australia, Stephen Walters, said. "Increased anxiety about job security will be a heavy burden for consumers in 2009."
New data released on Friday shows that demand for credit recorded its first monthly fall since the 1991-92 recession. Total credit fell 0.3 per cent in December, while the annual rate of 6.7 per cent was the slowest pace since 1994.
Economists had expected a 0.5 per cent increase in the month. "There should now be nothing in the way of the RBA (Reserve Bank of Australia) delivering a large interest rate cut next Tuesday and signalling a desire to do more of the same at future meetings," TD Securities senior strategist Joshua Williamson said.
Financial markets are pricing in the risk of the RBA cutting its official cash rate by a further 100 basis points when its board meets on Tuesday, it's first meeting this year. This would take the cash rate to 3.25 per cent, a 45-year low. The markets are fully pricing a 2.0 per cent cash rate by mid-year. A breakdown of the RBA's credit data was even more dire.
Personal credit - outside of home loans - sunk a further 1.1 per cent in December and now stands 5.2 per cent lower than a year earlier. This is despite the central bank's 300 basis points worth of easing in the last four months of 2008. Total housing credit grew by a mere 0.4 per cent to an annual rate of 7.6 per cent. "This was despite the increase in affordability from lower official interest rates and the increase in the First Home Owners Grant in the month," Mr Williamson said. The government doubled the grant to $14,000 until June this year for existing home purchases, and to $21,000 for newly built homes, as part of last year's $10.4 billion economic stimulus package.
Worse still, business credit also fell for the first time in almost five years, down 1.1 per cent in December to an annual rate of 8.0 per cent. "The fall in business credit does suggest that the impending slowdown in business investment is occurring earlier than we thought," ANZ senior economist Katie Dean said.
Business investment has been a major plank for the economy in recent years, particularly in the resources sector as profits from China's demand were sunk back into companies' infrastructure.

Preventing those after Christmas credit card blues

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 23 Jan 2009 21:47:00 +0000

As we get ready to start work in the new year, you may be suffering from credit cards blues as the thought of those bills that are about to hit your letterbox start to filter into your mind.
The easy way is not overspending, but I guess that that advice is a little late.
So lets have a look at a few suggestions for managing the debts that have become a reality for you.
The first thing you need to do know how bid your debts are.
Once you have this picture, maybe you can do a card swap. NAB and other lenders are offering interest free transfers right now.
Switching to this arrangement and then committing to debt reduction within the interest free period might save your bacon.
By pay off this debt over say the next six months or 90 or however long the grace period will put you in control.
Even if you don't switch your bank credit cards, make a habit of paying the whole debt to zero in the normal interest free period.
Never just pay the minimums. This is a suckers path to eternal debt.
Please remember that Christmas is a one day event. It is not worth spending six months of your surplus income on and then paying your credit card debt off over the following year.

Greedy banks raise credit card rates as official cash rate falls

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 23 Jan 2009 21:29:00 +0000

Australian banks are accused of being greedy and taking advantage of the financial crisis and the Rudd Government' s shop message, as they slide up the credit card interest rate by up to 2% as official cash rate falls by a similar amount.

Research has revealed at least five card providers increased their interest rates in the past three months, even though the RBA has slashed the cash rate by 2 per cent since September.
According to financial data company Infochoice, GE Money and Wizard Home Loans had both increased credit card rates by 2 per cent or more since September, when the RBA began its series of rate cuts.
Bank of Queensland, Citigroup and Suncorp had also increased rates on some cards by up to 0.84 per cent.
Crucially, not a single credit card provider passed on the entire two percentage points of official cash-rate cuts announced since September.
Commentators said banks should be put under more pressure to ensure that interest-rate cuts are applied across the range of financial products, so the economy gets as much stimulus as possible.
So far the Federal Government has given away $10.4 billion in a massive financial giveaway, and the RBA has cut rates aggressively, yet part of the benefit of these measures is being wiped out by banks, which are keeping the savings for themselves.
"By not passing on the rate cuts, card companies are doing nothing to alleviate the debt burdens on Australian households so are limiting the effectiveness of monetary policy,'' TD Securities senior analyst Josh Williamson said.
"It could be banks are robbing Peter to pay Paul - using money from credit cards to help subsidise cuts to their mortgage rates.''
With the average credit card rate at just under 20 per cent, borrowers paying over the odds should switch as soon as possible - preferably to a zero per cent deal which will help them pay off the capital quickly.

Credit card crime is on the rise. How not to become a victim

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 15 Dec 2008 11:58:00 +0000

Credit and debit card scams are on the rise but you can take steps to stay safe.
According to the first official survey of personal fraud in Australia, about 3 per cent of credit card holders can expect to experience card fraud this year, while nearly 60,000 people could be conned out of their confidential banking details in "phishing" scams.
And don't think it won't happen to you. In the case of card fraud, the Australian Bureau of Statistics study found the vast majority of victims - 70 per cent - were employed, married and Australian-born, with nearly half of them highly educated.
The chief executive of the Australian Bankers' Association, David Bell, says: "So long as there's been money in the system, there's been fraud - it's an ongoing issue. In terms of the quantum, it's relatively small but that's not the point - the point is it should be prevented . . . because not only does it result in financial issues for customers and banks, it also goes to the person's sense of security with their accounts."
Australian Payments Clearing Association data for last year shows fraud remains a fraction of overall payments: 44.5 cents in every $1000 of transactions in the case of credit and charge card fraud, 7.1 cents in every $1000 for debit cards and less than one cent in every $1000 for cheques. However, while cheque and debit card fraud are falling, credit and charge card fraud are rising - up from 36.9 cents the previous year. About 70 per cent of that increase relates to cardholders making purchases overseas via the internet and telephone.
Generally speaking, you won't be held liable for losses to fraud, Bell says, as long as you don't contribute to the loss by your actions.
"So, for example, with a debit card if you were to write your PIN [personal identification number] on the card and you lost it and someone removed funds, it would be a hard ask to get your money back," he says.
However, even if you're not financially liable, there will be a cost in terms of time and inconvenience as you sort out genuine transactions from fraudulent ones, rearrange any direct debits and wait for a new card.
So what can people do to protect themselves from financial fraud? These days it's not just a matter of never signing a blank cheque or making sure no one is "shoulder surfing" while you enter your PIN at the ATM.
Crime agencies and regulators say the increasing technological sophistication of criminals means it's also about safeguarding your computer from hackers and protecting yourself from identity theft when you go online.
DEBIT CARDS
Your PIN is the key to debit card security, Bell says. You should never give it to anyone, even a member of your family. And your bank will never, ever ask you to reveal it.
You should have a different PIN for each financial instrument or channel, such as your debit card, credit card and internet banking.
As with passwords, it doesn't hurt to change your PIN occasionally. But don't use numbers or codes that relate to things such as your birthday or age.
That's why social networking sites such as Facebook and MySpace are causing concern. Some people put sufficient personal information on them that a fraudster can "steal" their identity.
CREDIT CARDS
Never, ever lose sight of your credit card when you're paying.
"When you go to a restaurant, don't hand over your credit card and let someone take it away," Bell says.
Unscrupulous operators can record card details (including its three or four-digit verification code) and then use them for online or phone transactions.
Email is not a secure way to transmit information and if you're going to give your credit card number to somebody over the phone, make sure you know who you're talking to. Make sure you sign your card as soon as you receive it and have your mail collected or diverted if you're expecting a card while you're away.
Having a separate card with a low limit for internet transactions may save you some heartache if your details are intercepted online.
"Having a very large credit limit on a credit card does potentially expose you," Bell says.
The new chip-and-PIN credit cards offer a step up in security but, again, you must protect your PIN.
PHISHING
Criminals hope to catch people when they send out "phishing" emails purporting to be from the bank asking you to confirm your account details, password and PIN, supposedly for a "security upgrade" or some other ruse. The email may even contain a link to a replica website. Crime agencies say you should never click on such a link and it's good practice to always type your financial institution's website address into your browser.
Remember, your bank will never ask you for your password or PIN, Bell says, and certainly not via insecure email.
The ABA, the Australian Securities and Investments Commission and the Australian High Tech Crime Centre have a joint website (protectfinancialid.org.au) that provides more detail on how to protect your financial identity, while the Australian Competition and Consumer Commission's scamwatch.gov.au site offers help in identifying common internet scams.
ONLINE TRANSACTIONS
The Government's Stay Smart Online website, http://www.staysmartonline.gov.au, says you need to protect passwords for online banking and other internet transactions just as much as you would your PIN for a debit card.
That involves making sure your computer is protected by up-to-date anti-virus, anti-spyware and firewall programs and setting your browser security at a sufficiently high level.
It also suggests you should confirm the data is encrypted and safe from prying eyes by looking for the prefix "https://" in the address bar and for a locked padlock symbol at the bottom of your browser window.
Always log out from internet banking when you're finished and go the extra step of also closing your browser.
"If any other windows 'pop up' during an internet banking session, be suspicious, especially if it directs you to another website which then requests your customer identification or password," the website says.
SOCIAL NETWORKING
An Australian Federal Police spokesman says you should configure your web browser so it won't remember the data you enter into forms and you should never select "Remember me on this computer" or similar boxes on websites.
You could even go as far as deleting cookies after your internet session.
If you use social networking sites, treat everything on the site as if it were publicly available information. Don't display your date of birth, address or other personal information. Check the site's privacy settings to make sure they're high enough to resist non-friends finding out too much about you.
Don't accept "friend" invites from people you don't know and don't accept the name of a user at face value - they may not be who you think they are.
Be careful about using applications on these sites as they're run by third-party companies that may also get access to all your personal information.
The growth of identity theft has prompted credit bureau Veda Advantage and security group Secure Sentinel to announce last week a $65-a-year service that alerts individuals by email whenever there's a change in their credit file.
IF YOU BECOME A VICTIM
Tell the police immediately.
* Alert your bank or financial institution.
* Get a copy of your credit report and check it.
* Close all unauthorised accounts.
* Keep all documentation.
Source: Australian Federal Police

Credit cards holders get the short end of the stick, but whose complaining?

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 08 Dec 2008 09:06:00 +0000

If you are like me and you have a credit card, chance are you are feeling hard done by.
The Government is out there asking people to spend, spend spend, and mortgage rates are dropping like a lead balloon, but we don't get any joy from equality in rate reductions on credit card debt.
I just don't get it. I thought that when the cost of money is going down then the banks would reduce the rates of money for all clients. But business customers and credit card holders seem to be holding up the banks bid to smash profit targets in spite of poor decisions and rampant wage and bonus claims by top level [not top performing] managers.
It would be one thing if nobody cared or was hurting financially right now, or who was facing financial hardship.
It would see obvious that we have a lack of credit card competition, and that may be the answer to our question. With the major players in credit card finance taking a heavy hit in the US recently, and with these guys suffering loses in the US due to a long recession which only looks like getting worse over there, these guys are leaving our markets or taking as much profit as they can muster, and letting our banks get away with what seems to be like daylight robbery when it comes to credit card interest rate charges.
If this was Italy, Governments would fall, in France there would be riots in the streets, in Greece they would be throwing Molotov cocktails, but hey this is Australia. She'd be right Mate!

Citigroup executives consider sale of all or part of bank

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 26 Nov 2008 03:38:00 +0000

With Citigroup stock value plunging, top executives at the financial giant are considering the sale of all or parts of the company, the Wall Street Journal reported on its website.
The debate within the company is at a "preliminary stage," and officials said the company has "ample capital, funding and strategic direction," the daily said.
The sale option is one of a range of dire scenarios company executives were considering after Citigroup stock fell another 26 percent Thursday, after a 23 percent drop on Wednesday.
The company's board of directors is expected to meet Friday to discuss options to reverse the stock slide, people familiar with the situation told the daily.
Citigroup, a component of the blue-chip Dow Jones Industrial Average, has tumbled more than 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis.
Chief Executive Vikram Pandit and other company executives have told colleagues they are frustrated and confused by this week's 50 percent stock decline, the daily said.
Citigroup stocks on Thursday closed at 4.71 US dollars, their lowest level in 15 years, despite Wednesday's announcement by Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that he would increase his holdings in Citigroup Inc. to 5.0 percent, adding that he supports the banking giant's management.
At 25.6 billion US dollars, Citigroup's value on the stock market is barely higher than the 25 billion dollar aid package the US Treasury extended it last month, in the framework of its 700 billion dollar bailout plan for stricken financial institutions.
Besides considering selling the company to another bank, Citigroup executives are also looking into selling parts of the company, including the Smith Barney retail brokerage, the global credit-card division and transaction-services unit, Citigroup's most lucrative and fast-growing businesses, the newspaper said.
They are also exploring the possibility of merging with a rival. Some analysts have pointed to Morgan Stanley and Goldman Sachs Group Inc. as potential suitors, market analysts told the daily.
Citigroup also want to make it more difficult for investors to place bets that the company's share price will fall, a strategy known as "short selling," and have been lobbying the Securities and Exchange Commission to reinstate a ban on the trading strategy imposed at the start of the stock market crash.
Citigroup on Monday announced it was slashing a near-record 50,000 jobs worldwide in further belt tightening to cope with the global financial crisis and heavy losses. At its peak last year, the company employed 375,000 people.
It was the second largest job-cut announcement on record, according to global outplacement consultancy Challenger, Gray & Christmas, tying with 50,000 job cuts by retailer Sears, Roebuck & Co. in 1993 behind the all-time largest the same year: 60,000 by IBM.

Citigroup says credit card loan losses will rise in the recession

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 24 Nov 2008 01:21:00 +0000

Citigroup says losses in its credit card portfolio could rise between $US1 billion and $US2 billion each quarter from now through the first half of next year.
Citi's credit card losses could double over the next nine months.
Shares of Citigroup, which plans to slash 50,000 jobs worldwide, had declined 9.5 per cent to $US8.05 with just under an hour of trading remaining on Wall Street.
Citigroup also revealed its plans to change its accounting for a large portion of its risky, written-down assets. It will move about $US80 billion of the assets from its trading portfolio to either its held for investment, held to maturity or available for sale categories on its balance sheet.
Citigroup said that the company's capital position was strong and it was moving ahead with restructuring plans, which include an additional 50,000 job cuts.
Citi reported last month a $US2.8 billion net loss in its third quarter; its losses over the last four quarters totalled more than $US20 billion.

Stop spending on plastic

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 11 Oct 2008 05:11:00 +0000

Credit card borrowers have been told to cut spending through the Christmas period.
Use the rate cuts windfall to pay down your credit card debt.
Because of Global funding cost rises you cannot expect the banks to pass on all the rate cuts coming over coming months, though the Government and opposition will be putting a lot of pressure on them to comply to this expectation.

In the Christmas holiday season borrowers should be thinking about reducing their credit card debt, as we don't know how the financial markets will affect the rest of our economy.

Credit card debt generally rises due to increased spending, but we have seen that most cardholders have started to reduce their balances.

Another credit card day another million dollars for your bank

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 08 Oct 2008 21:24:00 +0000

Every day that your credit card interest rate remains high, it gifts every the major bank almost $900,000. No wonder you can't pay your bills or your card card down!
Australia's four big banks have failed to deliver any relief on the nation's credit card holders despite the RBA discounting official cash rates by a full 1 per cent.
Fears of global recession yesterday wiped $56 billion from the value of local shares and sent the dollar plunging to a five-year low.
The Australian stockmarket dived 5 per cent. Bank stacks were hit hard.
In a move that had been anticpated by Mr Mortgage on Tuesday, lobal central banks took the necessary step last night of co-ordinating a series of interest rate cuts in a bid to stop further stockmarket plunges.
But as world markets melt down analysis commissioned by The Courier-Mail shows that each day the interest rate on credits cards remains unchanged, Australian banks pocket an extra $886,500.
If the rates remain frozen for a whole month, banks will score a windfall profit of almost $27 million, according to finance research house Cannex.
A leading consumer advocate yesterday angrily hit out at the banks, accusing them of hurting ordinary Australians doing it tough.
"Not passing on any interest rate cut to credit card holders is just punishing people who are already struggling," said Nicole Rich, of the Consumer Action Law Centre.
Almost every Australian adult has at least one credit card and the nation's collective card debt, attracting interest, has blown out to $32.4 billion.
As the global economic firestorm gathers pace and hits the Australian economy, many households will find it harder to pay off ballooning credit card debts.
Many popular Australian credit cards have interest rates as high as 20 per cent and Cannex calculates the average credit card interest rate is 16.8 per cent.
On Tuesday, all big four banks moved swiftly to cut home lending rates by 0.8 per cent when the Reserve slashed the cash rate to 6 per cent, but it is a different story when it comes to credit.
The Courier-Mail contacted the Commonwealth, the ANZ, National Bank and Westpac, who all conceded credit card interest rates remained unchanged but insisted they were "under review".
A spokeswoman for the Australian Bankers Association refused to comment on credit card rates, saying it was a matter for individual banks.
Sharemarket battered
In another day of high drama, there were further signs the Australian economy could be tanking.
The Australian sharemarket dived yesterday with the All Ordinaries shedding a hefty 228 points.
Consumer sentiment fell to near 17-year lows and the number of owner-occupied housing loans fell for the seventh straight month.
Craig James, of Commonwealth Securities, said the new data justified the Reserve Bank's decision to go for a 1 per cent cash rate cut on Tuesday.
The four major banks have all opted to pass on 80 per cent of the cut – 0.8 per cent – on home loan rates.
But Opposition Leader Malcolm Turnbull tried to claim credit, saying if it was not for the Opposition then the banks would not have passed on such a large amount.
"I have stood up for borrowers and I think borrowers have got a better deal as a result," he said.
Treasurer Wayne Swan hit back, accusing Mr Turnbull of letting his arrogance get out of control.
"I know Mr Turnbull thinks that the whole world revolves around his ego, but there are some events in the world which are much bigger than Mr Turnbull's ego," Mr Swan said.
Meanwhile, economic researcher, David Richardson, of The Australia Institute, estimated Australia's big banks could boost their annual profits by $1.4 billion by not passing on the full 1 per cent rate cut on home loans.
But the Commonwealth Bank has vowed to reduce its mortgage rates by more than 1 per cent when markets return to normal.
The Commonwealth yesterday also announced a takeover of BankWest in a deal worth more than $2 billion.
Queensland Premier Anna Bligh said although the Prime Minister had insisted banks absorb some of the cut, the full savings should be passed on as a "matter of principle".
"I understand the Prime Minister has been saying he believes that this interest rate cut should be passed on as fully as possible," she said.

As the credit card turns 50 how will you celerate?

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 08 Oct 2008 03:51:00 +0000

Although Diners Club was launched in the late 1940's, it was used for dining purposes, and so American Express introduced the World's first credit in October 1958, and if you are not celebrating, then perhaps you like them too much. That was in the days when it really was a card. Plastic was a long way off.
In its first year alone Amex signed up 500,000 customers worldwide, including Elvis Presley and US president Dwight D. Eisenhower.
Since then it has changed the way people buy and view money and has meant that saving is a thing of the past. Overall why go through the pain of saving money when you can have things now?
With the current financial crisis don't expect easy credit. Mr Mortgage suggests that you pay down your credit card and switch to a debit card. Yes I know that that is even more pain than saving, but If you have a job and an income its time to give debt the flick.

Commonwealth Bank to pass on rate rise to mortgage and credit card holders with mortgage rate rises expected with US subprime concerns

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 10 Nov 2007 21:09:00 +0000

The Commonwealth Bank becomes the second major bank to pass on Tuesday's increase in official interest rates by the Reserve Bank.
The National Australia Bank (NAB) was the first to pass on the increase.
And NAB chief executive officer John Stewart earlier said there could be more rate rises to come.
"Could there be more rate rises? Well that's clearly a matter for the Reserve Bank - they make that decision," he said.
"It would not surprise me. I think our chief economist is predicting another rate rise early next year."
Meanwhile, Prime Minister John Howard has reiterated his comments that the subprime mortgage problems in the US do not justify the banks hiking their lending rates.
"Well we don't think that there is a case for banks putting up their interest rates beyond official increases unless there is demonstrable evidence that the cost of their funds has risen, particularly when the bank is making a very big profit," he said.
Source: ABC

Payday lenders are subjected to inquiry

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 27 Oct 2007 21:56:00 +0000

An inquiry into pay day money lending in South Australia has recommended workers in the industry be subject to criminal checks.
State Parliament's Economic and Finance Committee is also calling for a special tribunal to resolve disputes between lenders and customers.
Committee President Tom Koutsantonis says criminal checks are needed because of the unlawful conduct in the industry.
"The police tell us that organised crime and especially bikie gangs move in where there is an opportunity," he said.
"If there is a market for them to move in and take advantage of people, they will."
Mr Koutsantonis says the inquiry heard cases of unethical practices, and interest charges of up to 1,000 per cent a year.
The committee wants a special tribunal to resolve disputes.
Mr Koutsantonis says the tribunal would have judicial powers to make binding orders, and the ability to revoke or amend licences.
"The problem is that when people are taken advantage of in these schemes they have no real recourse because they can not afford to go to a court," he said.
"If we have a tribunal, Mums and Dads could go and say 'Look I borrowed this much money at this much per cent'."
Source: ABC

Beating credit card bankruptcy in Australia

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 22 Oct 2007 20:28:00 +0000

Household debt in Australia on the rise

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sun, 21 Oct 2007 20:24:00 +0000

Household finances around Australia have taken a battering in the past year, according to research by ING Direct and the Melbourne Institute.
Telephone interviews with 1200 households found 46 per cent of families were managing to save money compared with 54 per cent a year ago.
The number running into debt rose to 7 per cent from 4 per cent.
”Higher interest rates, bigger mortgages, record levels of credit card debt, larger grocery bills and the general rise in the cost of living are affecting our inclination and capacity to save,'' ING spokesperson Michael Smolders said.
Western Australians were the best savers and the least likely to go into debt. Victorians were the second best savers and households from New South Wales came in third.
But the New South Wales ranking improved from three months ago when it claimed the wooden spoon for savings.
Households in South Australia are now the worst savers, the survey found.
”The piggy bank has certainly gone missing in action amount the majority of South Australian households,'' Mr Smolders said.
Nationally, the survey found less people were prepared to commit to saving for expensive items like home renovations - down to 14 per cent from 24 per cent - a new home - down to 14 per cent from 17 per cent - and travel - down to 38 per cent from 45 per cent.

De facto couples are 'risking financial ruin'

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 18 Oct 2007 08:22:00 +0000

De Facto couples are being advised to draw up "domestic relationship agreements" or risk financial ruin if their partnership breaks down.
Family lawyers say a growing number of men and women who split from long-term partners are losing out because they are not entitled to the same legal protection as married couples.
Most are unaware of the "cohabitation trap", in which their legal rights change automatically after two years or if they have a child together.
This can result in a single mother being deprived of financial compensation for the future or a de facto making a claim on a property or asset owned entirely by their partner.
Census figures show 76 per cent of Australian couples have lived in de facto relationships.
Jackie Vincent, a partner in Watts McCray, Australia's largest specialist family law firm, told The Sunday Telegraph couples needed to be more aware of the potential legal pitfalls of de facto relationships.
"We need to get people to understand what their life choices mean," she said.
"Choose to live your life how you want to live it, but be aware of the consequences. We do see a lot of de facto couples and we think: 'Do they really realise what they're getting into?'
"It's traumatic for them when you say to them their partner could have a claim on their house."
Ms Vincent described "domestic relationship agreements" as being similar to pre-nuptial contracts for married couples, specifying exactly how assets and money should be awarded to protect each partner in the event of a separation.
Mothers were usually the biggest losers in de facto break-ups because they received less in separation settlements than married women, she said.
Sydney couple Paul Cassat, 30, and his partner Alicia Twohig, 25, have lived together for two years.
"We bought (property) together and we have nominated each other as equal beneficiaries," Mr Cassat said.Source: Sunday Telegraph

Americans turns to credit cards in the aftermath of the recent mortgage meltdown

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 10 Oct 2007 07:46:00 +0000

America's favourite automated teller, their mortgage, is empty and Americans are relying increasingly on credit cards to pay their living cost shortfall, indicating tough hurdles ahead for US consumer spending and markets.
Federal Reserve data released on Friday showed US consumer borrowing rising by $US12.18 billion ($14.2 billion) in August, more than 20 per cent more than economists had forecast.
Most striking was an 8.1 per cent increase in borrowing on revolving credit lines, mostly credit cards, to a record $US909 billion.
Credit card borrowings rose at the sharpest rate since early 2002.
So what was it that persuaded consumers to rack up more debt during the month?
Was it the increasing press coverage, no doubt reinforced by friends and family, that their houses were worth less than a month or a year ago?
Or was it the near meltdown in financial and credit markets that prompted a surge in speculation about an upcoming recession?
Quite possibly, it wasn't because they felt better, but because things had gotten suddenly worse.
"If they had been financing their consumption on the basis of the equity of their homes and suddenly that is cut off then they will have to borrow more through traditional channels," said Stephen Lewis, economist at Insinger de Beaufort in London.
And August was a very bad month for the substantial minority of Americans who have depended upon housing borrowing to finance ongoing consumption.
Not only were house prices continuing their slow, steady march lower, but the world had woken up to the seriousness of the issue and the asset backed financing markets more or less shut.
That meant less housing wealth to borrow and fewer lenders willing to lend against it, either in the form of a home equity loan or refinancing.
So, what's a borrower to do but put it on the card.
Retail sales rose just 0.3 percent in August, and when motor vehicles and parts were stripped out, sales fell 0.4 per cent, the sharpest drop since September 2006.
Considering that people always have to eat and many Americans have only limited discretion over how much gasoline they use, a period when credit card debt is expanding rapidly while retail sales are contracting points to debt financing of necessities, rather than luxuries.
That, clearly, can't go on forever.
Falling gasoline prices pulled the government's measure of August gasoline sales down sharply, weighing on the overall retail sales reading, however.
Ryan Sweet of Moody's Economy.com notes that mortgage equity withdrawal has been down sharply on a year-on-year basis, a factor that if extended would force consumers further into the arms of their credit card lenders.
Interestingly, the market for credit card based asset-backed securities has recently become quite hot.
Credit card ABS issues in the United States is the only asset-backed segment to experience growth in 2007, up 30 percent on the year to September to $69.2 billion.
Spreads have tightened as well, after having widened considerably over the summer.
Delinquencies are still low, though the most recent data covers only the second quarter. Late payments on bank cards fell in the second quarter to 4.39 per cent from 4.41 per cent, according to the American Bankers Association.
Given the experience with subprime, you can expect that banks will tighten, indeed may already be tightening, access to consumer credit, and that they will see those low rates of late payers rise. Source: Reuters