Credit Cards

Credit Cards: Green Bandt to ban Hole in the Wall cash bandits.

2010-11-24T19:17:00.000-08:00

You'll "get more green out of your ATM cash machine" soon if Andrew Bandt gets his private members bill over the line.

Bandt's bill has the attraction factor

Green Andrew is proposing a ban on those $2.00 ATM transaction fees for withdrawing cash.
Politicians from the entire spectrum are liking his tune and are backing Green MP Adam Bandt's private member's bill.
Bob Katter also stuck his boot into the Government and Opposition for skinny policy offerings, though Labor Treasurer Wayne Swan has been holding its cards close to it chest. He is expected to release his plan for banking reform later this month.
Though Independent MPs Andrew Wilkie, Tony Windsor, Rob Oakeshott and Bob Katter and unaligned Nationals MP Tony Crook said Mr Bandt's bill, now before Parliament, was the most promising proposal on banking, they have yet to see the Labor Plan, but I suspect that it will be more wide ranging in terms of offering real competition to the major banks than Andrew bandt's bill. Let's wait and see on that one.

Call to action to stir Wayne Swan

The calls to action increases the pressure on Treasurer Wayne Swan, who will next month announce banking reforms that could need the support of the crossbenchers.
The banks' all claim that politicians did not understand that funding costs were going up. Wilke says that this core claim is nonsense.
Mr Katter said the surge in banking chiefs' salaries also warranted attention and could be curbed through the tax system.
Mortgage Foreclosures unfair.
He called on the government to do ''something serious'' about the system of mortgage foreclosure, which was weighted in lenders' favour.

Summary of Bandt's Bill

As it stands, Andrew Bandt's proposed bill has three main areas of saings for Australian Credit users.

A crackdown on Bank Fees.
Mortgage Rates to move in line with RBA increases
A ban of bank transaction fees of $2.00 per transaction.

Whatever the outcome, it looks like Australia's Parliament is in for a lively time on the floor next year, and home buyers can look forward to more and better loan offers from nonbank players, lower mortgage interest rates and lower fees, no to low exit fees on their mortgages rates, and credit card losing unfair fees. Sounds good to me.

Credit Cards: CabCharge pays $15m in trade abuse case

2010-09-29T20:28:00.000-07:00

CabCharge gets off lightly in credit card scam

If you elect to pay by non cash means in a cab in Australia, you goy stung 10%.
Well now the 10 per cent surcharge on taxi fares for non-cash payments could be lifted after CabCharge admitted breaching the Trade Practices Act by abusing its market dominance.

Credit cards business closed to competition by CabCharge unlawful

CabCharge admitted it had taken advantage of its position in the market to refuse requests from competitors to process Cabcharge cards on their electronic payments systems.
The company also admitted to predatory pricing by installing its fare meters free or below cost, squeezing rivals out further.

CabCharge agrees to pay $15 million in fines

It will pay penalties and costs of $15 million after agreeing to a settlement with the Australian Competition and Consumer Commission [ACCC] yesterday in the Federal Court, avoiding a lengthy court battle that was due to begin next month.
The ACCC chairman, Graeme Samuel, said the settlement was a ''clear message to Cabcharge it had gone too far'' and would lead to greater scope for competition in the industry - and lower prices for taxi customers.
''Generally where you can get some competition in the marketplace you tend to find service levels increase and prices reduce for consumers,'' Mr Samuel said.

''You could see potentially service providers saying to cab drivers and cab owners 'We can offer you a better deal than Cabcharge can offer', and Cabcharge will have to meet that competition.''

CabCharge slugs 10% on every credit card transaction

Cabcharge levies a 10 per cent surcharge on every fare processed on its systems paid by credit card, bank debit card or through its proprietary charge card and vouchers.
Its long-standing and popular charge account has helped it become the dominant player in the industry. It has its machines installed in 96 per cent of taxis across the country, though its rivals have increasingly encouraged operators and drivers to install their machines additionally, offering them a cut of the 10 per cent surcharge.

CabCharge forced to agree to Compliance of ACCC

The court ordered Cabcharge to comply with a compliance program involving beefing up its internal controls and training to ensure it did not contravene the act again. It will also be subject to external audits.
Mr Samuel said the penalty would deter CabCharge from repeating its behaviour.
''They now know what constitutes a breach of the act and misuse of market power.''
In a joint submission with the ACCC tendered to the court, Cabcharge said it had been unaware it was breaching the act but now accepted its actions were ''serious in nature and extent''.
The submission said the contravening conduct was undertaken at ''the most senior level of the corporation'', including its prominent executive chairman, Reg Kermode.
Mr Samuel said the settlement had reaped the highest penalty imposed by the commission for the misuse of market power.

Were CabCharge rewarded for bad behaviour?

Based on the amount ripped off from the public, many are saying that CabCharge out out of jail in that the fine was tiny compared to the money made from the scam and this was reflected in CabCharge's share price surging over 10% higher.

You will need to claim losses yourself

The ACCC did not quantify any loss or damage to consumers or competitors, saying it was ''not likely to be readily ascertainable''.
Whilst CabCharge denied its behaviour had contributed to any such loss or damage if you paid the amount you would have suffered.
Any individual, business or Government Department who has suffered a loss or damage, or who wants to get a refund on the 10% surcharge should contact CabCharge now.
Source: Mr Mortgage

Credit Card Security: How to protect yourself from credit card fraud

2010-07-05T20:36:00.000-07:00

The WorldWide Web is a game changer when it comes to using your credit card for online shopping That unfortunately means that it is also a rich new resource and playground for cyber criminals.
Due to lack of security, one in 10 of Australia's internet users are now losing money to online identify fraud over the past year with losses totalling $1,286,000,000, reports VeriSign, a major player in the SSL Certificate industry.
That's an average of $1,000 per fraud victim of the 1,300,000 people affected, with more being lost in the 18-24 year old profile.
This is a 30% jump on the amount of money lost online in 2007.

Eight things that you can do to protect your personal and credit ID online.

1. Don't use your credit card to make purchases online. Use a Debit card instead. This will limit your losses to what money is left on the card. If you only transfer funds to it as required, then any losses will be tiny.
2. Keep your firewall, virus and phishing scanner software up to date and run them when online.

You could consider changing to an Apple computer. They are much more secure and less prone to virus and Trojan attack, but not immune. Try the iMac, the Mac book or the Power Book when you next update. There are a lot of other benefits also. You may want to keep the iMac for the Internet only, and the PC for desktop only duties. For business use Microsoft applications are easy to use. As PCs are so cheap these days, maybe you should use one for desktop work only and use your Mac for online work.
3. Use an encrypted keyboard. This ensures that keyboard readers are foiled.

You could also use a bank that uses a scrambler for your pin numbers. The scrambler randomly changes each pin number to a letter, each time you login. So your pin is scrambled each time you enter it. And will be different the next time you log in. This foils keyboard readers.

4. Ensure that you are putting your personal info into an encrypted form with a secure certificate. You can tell this by the address line in the browser starts with https: instead of http:
This is essential as even a trusted site can have your details stolen is it does not secure your information.

4.Even if you use a PC, don't use Internet Explorer for web surfing or purchasing. Install a more secure browser. Try Google Chrome, FireFox, Safari or Opera instead.
Apple's Safari for instance gives a warning when the security certificate is not known. Heed this warning and ensure you trust the site before proceeding.
This warning is when the browser detects a generic security certificate, not necessarily a bad site to transact with. For instance I have noticed that Melbourne IT, Australia's peak Internet names registrar uses a generic certificate, and I obviously trust Melbourne IT so I proceed with the transaction.
If the SSL certificate is issued by Verisign, Geo Trust or Thawte these are recognised as authentic and verified by the issuer, and show as such. These site also come with a guarantee.

5. Use a third party payment method for buying from unknown sites. Small companies understand they don't have the trust factor that major online brands command, and some cannot afford the security vigilance required online today, so most will opt for a third party payment solution as a way to ensure they don't lose business opportunities because of this lack of trust.
Third party payment options include PayPal, Digital River, e-Junkie, and 2Checkout. This means that your details will not be going to the merchant, but the trusted intermediary who are better placed to protect your information. I have used all of these to pay for goods online. Paypal is the best known, some merchants offer two so you can choose one, and I have used e-Junkie and 2Checkout where a choice is offered. Again, when you go to the transaction area, make sure that you are on the right site by checking the URL address in the browser window, and that it is in fact a form protected by an SSL certificate.

6. Always check your credit card/ debit card statements and determine that all transactions on there were authorised by you, and notify immediately your credit card issuer if there's something on there that you don't recognise. Also take your time. There may be transactions that you have forgotten about.

7. Try to resolve any errors with the merchant before contacting your bank. Your bank will give you more credence if you do, and relate the conversation to them.
Even honest companies make mistakes, and I have had Amazon make a couple of double orders when I did not want this to happen.

Another time I pulled out of my order without confirming the transaction, and somehow it went through. These were quickly resolved by Amazon for me.
8. Beware the free offer. Do not go for any free sample offers that come up. These can be bate traps for getting your credit card info.
I did once. It went from a free offer, to a $1.95 postage [to get the credit card details], to $11.95 when it was transacted. I rang to cancel immediately and was told I could not. If I allowed the transaction to continue you were then slugged $68.00 for a second months supply. I rang my bank, who cancelled the transaction, and issued me with a new card. In 11 years of buying online it was the first time I was scammed. And this is typical of scams. They take a few dollars at a time.

By following this advice you should be able to use your credit cards [or preferably your debit card] online and not become another victim of Identity fraud.
Author: Rick Adlam of Mr Mortgage

Green your credit card at your local ATMs and shave your debts

2010-04-21T20:10:00.000-07:00

With new credit cards ATM transaction charge changes proposed by Greens Senator Bob Brown, you could soon save hundreds on all those "foreign" Bank ATM fees.
And the only one's who'll complain about it our those who profit from this rort.
The real cost of credit card fees and charges
It is estimated that this alone will save Australia's bank customers $600 million a year in direct fees.
When you add all the interest that is then extracted from bank customers, and then honour fees because this may put accounts over their limit, we are looking at over a billion dollars saved under legislation to be introduced in Federal Parliament next week banning $2 ATM fees.
Total fees and charges reductions targeted in the introduced legislation by Greens Senator Bob Brown can be as high as $5 billion a year charged in bank fees and charges.
Bob Brown claims this will put an end to profiteering by banks on mortgage fees.
The Greens' new Bill called the "Banking that serves the Community" Bill allows basic fee-free accounts, fair price mortgages and up-front disclosure of exit fees on mortgages.
Bob says that he feels that the proposed laws will put the power back in the hands of bank credit card customers and be a welcome force in keeping banks honest.

The most recent data from the Reserve Bank shows that there were more than 25 million cash withdrawals at foreign ATMs in February, representing $50 million in added credit card fees.
The proposed Bill also requires banks to show that any exit fees from mortgages reflect a reasonable cost and do not just act to chain customers to lenders.
Mr Mortgage home loans supports these changes.

Beating credit card bankruptcy in Australia

2009-11-15T18:11:00.000-08:00

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

2009-09-28T21:45:00.000-07:00

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

2009-07-03T20:59:00.000-07:00

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

2009-05-20T22:06:00.000-07:00

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

2009-04-30T03:48:00.000-07:00

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

2009-04-16T16:46:00.000-07:00

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

2009-02-03T12:59:00.000-08:00

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

2009-02-03T01:39:00.000-08:00

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

2009-02-02T01:24:00.000-08:00

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

2009-02-01T18:58:00.000-08:00

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

2009-01-23T13:47:00.000-08:00

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

2009-01-23T13:29:00.000-08:00

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

2008-12-15T03:58:00.000-08:00

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?

2008-12-08T01:06:00.000-08:00

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

2008-11-25T19:38:00.000-08:00

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

2008-11-23T17:21:00.000-08:00

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

2008-10-10T22:11:00.000-07:00

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

2008-10-08T14:24:00.000-07:00

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?

2008-10-07T20:51:00.000-07:00

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

2007-11-10T13:09:00.000-08:00

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

2007-10-27T14:56:00.000-07:00

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

2007-10-22T13:28:00.001-07:00

Household debt in Australia on the rise

2007-10-21T13:24:00.000-07:00

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'

2007-10-18T01:22:00.000-07:00

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

2007-10-10T00:46:00.001-07:00

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

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

2007-10-10T00:46:00.000-07:00

Major banks sales targets a debt burden on consumers, says finance union.

2007-08-12T00:58:00.000-07:00

The Finance Sector Union (FSU) says banks are contributing to excessive levels of consumer debt through pressuring employees to sell mortgages and credit cards to customers who do not need them.
A survey of more than 1,800 FSU members has found the majority feel forced to push debt on customers who simply cannot afford it.
The national policy director of the FSU, Rod Masson, says most bank employees think the high-pressure selling is undermining lending standards.
"They are put on what they deem to be inappropriate sales targets that have a negative impact on their ability to provide responsible customer service," he said.
Mr Masson says pressure-selling techniques are contributing to excessive levels of debt in the community.
"The danger is that they're actually taking loans that they will not be able to repay and ultimately will fall over," he said.
"We've seen the knock-on impact already of the non-prime mortgage area in the US and what that can do to the whole of the economy."
The FSU will present its findings to a Federal Government round table today to consider ways of forcing banks to review their lending practices.
Source: ABC

CREDIT WARNING: NAB at it again! National Australia Bank [NAB] forcing borrowers to the wall

2007-08-11T22:51:00.001-07:00

Allegations: The Safetli family says it has been misled into grave debt by the NAB.
Source: AFP: Greg Wood)
NAB accused of unconscionable conduct.
Several banks, NAB in particular, face complaints of unscrupulous lending behaviour in cases in which customers claim they have been forced to the wall after being persuaded to sign complicated loan guarantees they could neither afford nor understand.
The lending practices of the big banks are also coming under increasing scrutiny, with two influential federal parliamentary committees and the corporate regulator, ASIC, all intensifying their inquiries.
The claims come as growing numbers of Australians sink further into debt, leading to what has been dubbed "mortgage stress".
The Safetli family knows what it is like to lose almost everything to the bank.
When NAB foreclosed on their loans, husband and father Haissem Safetli, even lost his grip on sanity.
"I completely lost the plot," Mr Safetli said. "I lost my mind, I lost everything. I lost all feelings that I have left in this world."
His wife, Amanda, says the successful businessman had a complete breakdown.
"He ended up in a mental health facility trying to take his own life," she said.Source: ABC
Before their financial ruin, the Safetlis thought they were building their wealth on solid foundations, but they now say NAB's banking practices brought it crashing down around them.
The question worrying authorities now is how many other Australians could be in the same situation?
$800,000 mistake
The Safetlis are in financial limbo. As their dispute with NAB has dragged, Mr Safetli has tried to make a living out of selling tyres from his home garage.
He says his troubles began when NAB itself overextended finance to his wholesale tyre company under an existing trade refinance and credit facility.
In its ultimate notice of termination and formal demand, the bank admits it made an $800,000 mistake.
But according to the Safetlis, that didn't stop the bank demanding immediate repayment.
The money had already been spent on new stock. The family's cash problems only got worse as the bank began seizing assets, triggering a cascading series of loan defaults.
"At any time, we could have sold assets and paid off the bank," Mr Safetli said. "The problem you have with the banks is when they grab you, that's it, you're finished."
Homes lost
It might have been just another of the scores of business collapses that occur every year but authorities are especially concerned about what happened next.
Mr Safetli's mother, Faouzia, and her daughter-in-law claim the family's bank manager asked them to come to his office to sign some routine documents.
"He put all the papers in front of me," Faouzia Safetli said. "'Sign here,' I sign, that's it. 'Thank you very much.' That's it."
Amanda Safetli says she has realised in hindsight she should have checked what they were signing.
"My mother-in-law has limited English, limited reading," she said. "You walk into the bank, they give you a wad of documents, say 100 pages, and the little tabs say, 'Sign here, sign here,' and you do it."
What both women claim they were never told is that they were in fact signing binding personal guarantees over the loans mistakenly made to Haissem Safetli's tyre business.
Those guarantees would shortly afterwards see them each lose their homes.
Faouzia Safetli says nobody told her to seek legal advice before signing the document.
"I end up with nothing. My son - he end up with nothing," she said. "We all end up with nothing - our kids, his kids."
ASIC concerned
An independent advocate who helps people like the Safetlis resolve disputes with the banks, Bruce Ford, says the claims raise very serious questions about NAB's internal practices.
"The NAB and all banks are obliged at law to provide consumers to obtain independent legal advice prior to granting a guarantee," Mr Ford said. "That wasn't followed through with Mrs Safetli."
The corporate watchdog, the Australian Securities and Investments Commission (ASIC), shares the concern, as it makes clear to the bank in this letter: "NAB's knowledge of Mrs Safetli's level of understanding and the lack of any opportunity afforded to Mrs Safetli to obtain legal advice raises concern about unconscionable conduct by NAB."
Perhaps more seriously for the bank, ASIC is also concerned about NAB providing false evidence about the matter.
The bank told the watchdog: "Statutory declarations which stated that she had received independent legal advice were ... false and known to be false by the NAB."
Track record
NAB likes to advertise itself as an organisation responsive to the needs of its customers but the bank's critics say it has a bad track record.
"They've been prosecuted four times previously," Mr Ford said. "This is the fifth time now that the bank is under scrutiny for those precise things."
In fact, in 2001, the Federal Court ruled that NAB had acted unconscionably in the case of a Tasmanian woman left in charge of her husband's business after he had suffered a serious head injury.
In his absence, she signed what the bank told her were "routine papers". They were anything but - what she signed was a personal guarantee over the home.
The Australian Competition and Consumer Commission (ACCC) took action, alleging in court the bank did not explain the consequences of the guarantee to her, nor did it reveal that her husband's business was already in serious financial difficulty.
The ACCC said that not long after, the bank told the woman she had to sell her house to meet the personal guarantee.
As a result of that case, NAB consented to orders it would in future ensure its customers had the opportunity to obtain legal advice before signing guarantees.
But Mr Ford says the Safetlis' claims are history repeating.
"There's got to be alarm bells ringing for the regulator to say, 'Why are we here again after the ACCC's prosecution for precisely the same thing?'" Mr Ford said.
More allegations
Sydney pharmacist Voula Amassah is also locked in dispute with NAB, again over an agreement that she claims was never properly explained to her.
Ms Amassah says she lost her family home and other assets after her husband arranged a loan from the bank.
"I discovered that the loan had actually been rejected and the only way that it had been passed was by putting it in joint names and using my properties as security," she said.
Mr Ford says she was asked to sign up to it under "a certain degree of duress or stress".
"But she had no knowledge of the joint loan in her name until she got to the bank," he said.
Ms Amassah has since separated from her husband but says she is still angry with the bank for keeping her in the dark.
"Basically, I went in to sign a loan document," she said. "I wasn't given a copy of that document. I wasn't even given any statements when the mortgage was put into place, and that ended up being a financial disaster for me, a complete financial disaster."
Senators worried
The chairman of the Federal Parliamentary Committee on Financial Services, Liberal Senator Grant Chapman, says such practice would be inappropriate.
The committee has been on the receiving end of complaints about the banks.
In a written response to one, Senator Chapman notes that the allegations of malpractice and unconscionable conduct suggest a number of banks continue to engage in practices that appear to be seriously flawed.
"We want ASIC to thoroughly investigate each of these cases, come back to us with the details of their findings and then we'll make some decisions from there," he said.
But Opposition committee members like Senator Nick Sherry are not as confident with ASIC's ability to bring the banks to task and have accused the regulator of dragging its feet.
"Basically, when has ASIC examined the operations of internal dispute processes in, let's say, the four major banks?" he said.
"I have raised this issue on ... two or three previous occasions. I don't seem to be getting anywhere with some very clear definitive statistical, factual response."
'Debts unknown'
A complaint common to many who have defaulted on their loans is that their banks won't provide them account statements with a precise figure on how much they owe. That's despite banks like NAB vowing in its advertisements to its customers to tell it how it is.
Mr Safetli says his family is still trying to find out from the bank how much it owes.
"Write them a blank cheque - that's what they want," he said.
The ABC approached NAB for its response to the claims being made about its lending practices, but the bank declined to comment, saying that to do so would breach the privacy of its customers.
However, a bank spokeswoman did say the bank makes every effort to work with customers to resolve any disputes, and it will cooperate fully with any inquiries that are launched into that process.
But for their part, the Safetlis remain unconvinced by those reassurances.
"They're the ones that tell everybody what to do," Mr Safetli said. "They can do anything they want, any time they want and it's about time somebody just put a stop to it."
Source: ABC

Cusumer creit warning: National Australia Bank [NAB] forcing borrowers to the wall

2007-08-11T22:51:00.000-07:00

Men more likely to default on credit than women

2007-08-01T14:39:00.000-07:00

Men are more likely to default on credit obligations including credit card repayments, and have a higher rate of bankruptcy than women, a study has found.
The research, over a five-year period, also shows women make fewer credit applications than men.
The credit reference company Veda Advantage found men accounted for 62 per cent of all defaults on personal loans and overdrafts.
Men also accounted for 56 per cent of all mortgage defaults and 54 per cent of the 16,000 bankruptcy cases reviewed by Veda.
The most common ages for bankruptcy were between 28 and 37.
"This study indicates women appear to be more reliable payers than men," one of Veda's general managers, Erica Hughes, said in a statement.
"Although it's important to note that across the five-year period women applied for less credit."
Men accounted for 71 per cent of individual commercial inquiries and 56 per cent of credit card, overdraft and personal loan inquiries.
Young people, between the ages of 18 and 30, accounted for the greatest percentage of overall credit applications and eventual defaults.
During the study period, they made 35.8 per cent of all inquiries and registered 44.8 per cent of all defaults.
Young men had slightly higher credit application and default levels than young women.

BankWest takes on Big Four banks on interest rate and savings offer, with credit card offers to come.

2007-08-01T04:20:00.000-07:00

Bankwest has backed up its threat of taking on the nation's Big Four banks and yesterday pulled the price lever by launching the nation's highest interest-rate saving product.
The new BankWest Regular Saver Account, which comes less than a month after the bank's owner, HBOS Australia, announced an aggressive east-coast expansion, will offer an 8 per cent interest rate - 2.4 percentage points above its closest rival Rabobank at 6.6 per cent.
The high-yielding account is expected to be the first in a line of "better deal" banking products the bank will be rolling out over the next few months across retail deposit, credit card and mortgage products and will be accompanied with a marketing blitz.
"It's time the Australian banking and finance industry took savings seriously and BankWest is reinvigorating this space and leading the charge once again," BankWest's head of deposits, Paul Vivian, said.
"We do have some other products up our sleeve that we will be releasing later this year", Mr Vivian said, while pointing to credit cards, mortgages and savings as its primary focus. Earlier this month, HBOS Australia launched a $430 million-plus assault on the Big Four banks, with plans to roll out 160 branches across the east coast over the next three years. About 3000 jobs are expected to be created.
At the time of the launch, HBOS Australia chief David Willis warned that it hoped to win customers from the Big Four by being price competitive and introducing new products.
Outgoing Westpac chief David Morgan last week said BankWest's expansion "needs to be taken seriously and I think they will in time take some share".
Analysts are predicting the Big Four banks will take some hit on their cash earnings.
Mr Vivian said the BankWest Regular Saver Account was a long-term sustainable offer.
He said the 8 per cent rate was "pitched out there very purposely to be significantly better than any other savings rate in the marketplace".
"We would love to take customers and money off the Big Four banks," he said.
"There's some very lazy money currently (put) in products with the Big Four. It's time for customers to have a look at what their earnings on their term deposits are, what their earning on their at-call savings are and we are confident we can offer better returns across the place."
BankWest's share of the deposit space is about 4 per cent.
To receive the 8 per cent interest rates, customers need to deposit between $50 and $500 in that month, make no withdrawals during that period and link the account to another eligible BankWest account.

Credit Card record highs of no concern say credit card suppliers and retailers.

2007-07-23T03:36:00.000-07:00

Credit card debt is at its highest level ever for the average Australian credit card holder, but spending is being driven by retail purchases, rather than cash advances by families trying to make ends meet.
Figures released by the Reserve Bank yesterday showed total credit card debt topped $40 billion.
The average debt also rose, climbing by 7.2 per cent to $2990 in May, 2007.
Total value of cash advances fell to $1.086 billion in May from $1.135 billion at the same time last year.
CommSec economist Martin Arnold said the strength of the Australian economy had provided some of the impetus for the rise in credit debt, with the data pointing to continued resilience on the part of the consumer in the face of talk of rising inflation and lower affordability for housing.
"With the jobs market so robust and household income rising, we're going to see continued strength in consumer spending," Mr Arnold said.
It follows upbeat profit announcements by furniture and consumer electronics retailer Harvey Norman, reporting a 16.5 per cent sales gain, and David Jones predicting a 34.2 per cent increase in its profit forecast.
Australian National Retailers Association CEO Margy Osmond said yesterday the full effects on spending behaviour of the tax cuts in the recent federal Budget could sustain strength in retail spending.
"This is positive news considering the May retail sector figures showed some signs of a slowdown in spending. Clearly consumer sentiment is still high and consumers are comfortably splashing out on the latest gadgets and home entertainment goods," she said.
For young newlyweds, Juan Ostos and Francy Perilla, positive career prospects and affordable prices meant the time was ripe to set up everything they need for a new home.
The couple were happy to splash out on a second laptop and new dryer in a day, at a cost of over $1500.
Ms Perilla, 29, who works as a sales consultant, said she and her husband, an electrical engineer, were now in a comfortable financial position.
"We are better off financially than we were one year ago," she said.
"We are in the process of buying all those things we need."
Cashback offers and interest-free options meant forking out the money did not trouble the pair.
"We will pay a percentage now, and then pay the bulk of (the item's price) in one year, " Mr Ostos said.
Earlier in the year the couple also decided to upgrade their car.
With both working full time, the couple said they share the cost of all their new buys, paying half each.
"We split everything, " he said.Source: Dalily Telegraph

Credit Card debt average now over $3,000

2007-07-19T03:47:00.000-07:00

Australia's reliance on credit cards has continued with the total outstanding balance on Australian credit cards surging above $40 billion for the first time, new data shows.
The total credit card balance rose by $4.3 billion to $40.2 billion compared to $35.9 billion a year ago, figures released today by the Reserve Bank of Australia (RBA) revealed.
The value of repayments rose by 3.5 per cent to $17 billion compared to $16.5 billion a year ago.
The average debt on Australian credit cards has also risen, climbing by 7.2 per cent to $2990 in May 2007.
Consumer coping with credit card debt
However, CommSec economist Martin Arnold said while the number of purchases and transactions continues to rise, the value of cash advances as a proportion of the total balance has fallen.
“People are continuing to use their credit cards more effectively ... for any purchases really and then making repayments within the interest free period ... using the interest free period more effectively,'' Mr Arnold said.
The total value of cash advances fell to $1.086 billion, compared to $1.135 billion at the same time last year.
”Rather than showing people are struggling, using cash advances to make ends meet, it suggests consumers are doing quite well,'' Mr Arnold said.
Mr Arnold said the strength of the Australian economy had provided some of the impetus for the rise in credit debt, with the data pointing to continued resilience on the part of the consumer in the face of talk of rising inflation and lower affordability for housing.
”With the jobs market so robust and household income rising, we're going to see continued strength in consumer spending.''
Source: AAP

Platinum credit cards are top of the line

2007-07-15T01:24:00.000-07:00

Perks such as celebrity golf outings, free travel insurance, priority reservations at top restaurants and emergency access to a doctor in a remote area can be yours with a platinum credit card.
Introduced by credit card innovators American Express as a charge card and now offered by most financial institutions, platinum has taken over from gold in the premium credit card stakes to become the essential wallet accessory for the well-to-do and upwardly mobile.
And it's never been easier to go platinum as many financial institutions no longer apply annual income limits, to the point where the average Joe is likely to qualify if his credit rating is up to scratch.
But with annual fees ranging from $89 to $395 a year (or $900 a year in the case of Amex's platinum charge - as opposed to credit - card), are these credit cards good value for money or simply a piece of plastic with which to stroke one's ego?
VALUE FOR BIG SPENDERS WHO USE CREDIT CARDS
The best way to assess whether it is worth upgrading to platinum is to weigh up the value of the perks on offer against the annual fee being charged. Interest rates vary, but it's the "extras" that make platinum credit cards different.
But comparing perks isn't that easy. How much you spend on your card each year and the lifestyle you lead have a huge bearing on whether you can take full advantage of the rewards or benefits on offer.
The latest credit card survey by financial researcher Cannex shows the best value-for-money platinum cards for big spenders (categorised as those who spend up to $60,000 a year on their credit card but are able to pay off their balance each month) are offered by StGeorge, Citibank, Commonwealth Bank, HSBC and Westpac.
LOW FEES SUIT LOW SPENDERS
If your annual expenditure is unlikely to exceed more than about $12,000 a year or $1000 a month, then it may be better to choose a low-fee, service-oriented card where you don't have the pressure of having to rack up points to take advantage of a reward program.
While it also rates well for high spenders, the low-fee platinum card offered by St George offers a concierge service (see breakout), free international travel insurance and other benefits, but little in the way of a rewards program. Consumers weighing up the benefits of this card have to ask themselves if they are prepared to pay $89 a year to access a concierge service and the other benefits.
For many the answer is yes, says Sabina Zeljko, senior manager, credit cards, for StGeorge, who says its platinum concierge service is the same as most concierge services because MasterCard and Visa mandate a level of service that all card issuers have to meet.
Zeljko says while only a small percentage of St George platinum cardholders have taken advantage of the concierge service (the card was only launched in December), she expects numbers to grow.
Madeline O'Connor, head of cards marketing for Citibank, says those that have used the Citibank's concierge service once tend to become regular users.
WITH PLATINUM CREDIR CARDS
Compared with weighing up the merit of a concierge service, it's a much more tricky exercise to work out the true value of the rewards-based programs. "You need to know yourself and know the product," says Cannex financial analyst Harry Senlitonga.
He agrees that this is more easily said than done. For a start, the amount you need to spend to gain frequent flyer points varies, as does the value of frequent flyer points with different airlines.
Moreover, Reserve Bank reforms allowing merchants to apply surcharges to credit-card transactions have diluted the value of some programs, and some point systems have expiry dates.
But, importantly for those considering upgrading to platinum from gold, some platinum programs are more generous than the gold and the extra points you earn may compensate for paying a higher annual fee.
Cannex figures show American Express offers the most generous platinum reward program for free air travel. Not only do holders of an Amex platinum credit card qualify for a free domestic flight each year, but they (and holders of the Westpac Altitude Platinum Amex card) also need spend only $10,667 to qualify for a Sydney or Melbourne return trip to London on Qantas.
This compares with an annual expenditure of about $16,000 required by most gold cards, as well as most of the other platinum cards for free domestic Qantas flights.
Meanwhile, Amex platinum cardholders wanting to qualify for a free overseas trip need only rack up an annual expenditure of $85,333, compared with more than $120,000 for most of the other cards.
INSTANT GRATIFICATION WITH PLATINUM CREDIT CARDS
When it comes to "instant" benefits, such as free travel insurance, going platinum starts to look like a smart move for those who travel overseas at least once a year.
A recent study by Cannex found that cardholders could save hundreds of dollars a year by using the travel insurance packages on offer. "Most people used to assume that the travel insurance offered by credit card companies was inferior to the stand-alone product, but we found that the platinum cards were very competitive in this area," Senlitonga says.
That said, there are significant differences between the travel insurance offered by the various platinum cards. Senlitonga says to carefully read the fine print.
So what card does Senlitonga carry? "For me, gold is good enough until I spend more than my current expenditure of about $1000 a month."
You can see the cannex web site for a more detailed comparison of credit cards.
$900 a year gets jacket from Paris.
Despite forking out about $4500 in fees since he became an American Express platinum charge card holder in 2002, Giang Nguyen (pictured) is convinced the card offers excellent value for money.
An IT executive who frequently travels overseas, he uses the card's complimentary concierge service at least once a week.
The 34-year-old single Melburnian has called on the service to arrange tickets for a Cirque de Soleil performance in Las Vegas, ringside seats at the Australian Tennis Open, entry to London nightclubs and flower deliveries to overseas hotel rooms.
"There doesn't seem to be anything the concierges can't do," says Nguyen, who has come to rely on the service in the same way many executives rely on their personal assistants.
Nguyen uses the concierge team for personal shopping - they recently organised for a Hermes jacket to be sent from Paris when his size was unavailable in Australia. Nguyen says these services coupled with the Amex rewards program means he can justify paying the card's annual fee of $900.
He carries other credit cards to overcome the problem of the Amex card being less widely accepted than MasterCard and Visa.
And he isn't fazed when some merchants charge him an additional transaction fee (which on occasions is as high as three per cent).
"This is a small inconvenience," he says.
Source: The AGE

Easy credit card and cash loans ands easy mortgages are driving more to insolvency

2007-07-15T01:06:00.000-07:00

Taking advantage of fast easy credit cards and cash loans are increasing debt and insolvency.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
David Tennant, chairman of the Australian Financial Counselling and Credit Reform Association, said more ordinary Australians were finding it difficult to make ends meet.
Over the last six months his Care Financial Counselling Service has recorded a ten per cent rise in people needing assistance.
"The debt explosion is not because people are necessarily leading an extravagant lifestyle it is because it has become much harder for ordinary households to make ends meet, so they use credit cards and payday loans to bridge the gap.
"The deeply disturbing trend ... is a subtle shift from low-income to now medium-low income households simply not having enough money to have the basic lifestyle."
Mr Tennant said it was a relief that housing affordability was now a national issue because his group had been trying to draw attention to it for years.
A spokeswoman from consumer advocacy group CHOICE said a drop in house prices also had inadvertently put borrowers in the red.
"It's very disturbing when people sell their house and still can't reach payments for the outstanding mortgage," she said.
"There is a huge amount of individual responsibility required but it is also very hard when people are presented with all these finance opportunities. People don't think something bad is going to happen and then someone falls ill or a car repair is required.
"Australian consumers are under a lot of pressure to buy homes, to have a family home. They are told they can have a dream home. It is good to have confidence but you can't extend yourself."
The spokeswoman said there were grave concerns with fast loans when there was only limited testing of borrowers' ability to pay.
Bob Cruickshanks, deputy officer receiver for the Insolvency and Trustee Service Australia, said financial institutions were relaxing their means tests because of greater competition.
"Super funds are awash with cash and when you look around in Sydney there aren't really big projects absorbing it, so there is more money available and greater competition for the smaller finance companies to compete for borrowers.
"But the Department of Fair Trading has been like a hawk stamping out dodgy credit companies," he said.
Source: AAP

Credit card debt reduction always a good idea

2007-07-13T21:16:00.000-07:00

With the average credit card balance at its highest ever and households handing over a record proportion of their income in interest payments, people are starting to talk about turning back the clock on debt.
Some researchers are seeing a change in attitude to indebtedness among the under-25s in particular - a harking back to the financial caution exercised by their grandparents and great-grandparents.
Members of the internet generation may be more inclined to take a back-to-basics approach to consumption, says social and economic commentator Phil Ruthven, saving for the goods they want, rather than racking up credit card debt and personal loans.
"I think we will begin to see some more financial sanity emerging," Ruthven says of emerging consumers.
"The [net generation isn't] terrified of debt to the extent our parents and grandparents might have been, saving up for everything," he says.
"We're not going to move back that far - but I think the net generation are likely to be much more prudent and savvy with their finances."

This will be in reaction to witnessing debt cause stress among family and friends, but also part of the personality of this particular generation.
"The net generation is a 'civics' generation, which comes around every four generations," Ruthven says. "You could describe it as a little less materialistic - they see material things as a means to an end, rather than an end in themselves."
Social researcher Mark McCrindle, of McCrindle Research, says generation Y - teenagers to those aged in their mid-20s - has grown up with credit cards and never known a recession, so this age group tends to have high consumer expectations.
"But there's light at the end of the tunnel," he says. "They are the most materially endowed generation ever but they've found that doesn't satisfy them - that there's got to be something more. So there's a 'live slow' movement, a 'buy slow' movement - there's some little glimpse of what might change."
For now, financial advisers say that even clients on good incomes are experiencing stress over the level of their borrowing. It may not be enough to tip them over the edge financially but they are nevertheless feeling less than comfortable.
In lower-income communities, debt counsellors are seriously concerned about the prospect of an interest rate rise in coming months and outright dismayed by speculation there could two to three rate rises in the next 12 months.
Trading on the bond market indicates that an official rate rise of a quarter of a percentage point is an even bet for August and a certainty by November, with another rise priced into bonds for the first half of next year.
Rory Robertson, an interest rate analyst at Macquarie Bank, says the Australian Bureau of Statistics's inflation report, due out on July 25, will "make or break" the case for a rate rise as early as August.
By his reckoning, if the consumer price index trend figure is above 0.5 per cent, the Reserve Bank will act.
Advisers say such circumstances make it more important than ever to go back to the basics: budgeting, saving, and being disciplined about repaying any debts.
"The two words I use are planning and discipline," says Laura Menschik, the managing director of WLM Financial Services.
"People have to understand the difference between buying something right now and doing it a bit later, when they've been disciplined and saved for it - or even going without because they may not need it."
Menschik rolls off some examples: if you use the redraw facility on your mortgage to buy things, be disciplined about repaying that money over a couple of years rather than 25 years; leave a buffer for unexpected events such as the car breaking down or your roof blowing off; pay more than the bare minimum on your cards and loans.
And think about cutting up your cards. Menschik isn't alone in seeing people set about getting their finances in order - often by consolidating their debts in their mortgage or a personal loan at a lower rate - only to fall off the wagon and run their credit cards up again.
Karen Cox, the co-ordinator of the NSW Consumer Credit Legal Centre, says people don't always address the underlying problem that got them into debt in the first place, "which is that they're just living beyond their means".
"I don't say that in a judgemental way - I know a lot of people are struggling just to meet everyday expenses," Cox says. "But having debt doesn't help. It just makes it worse."
Financial planner Suzanne Baldry, of Baldry Financial Group, says a budget should be the foundation of any financial strategy.
Budgets might be considered boring and old-hat, but they work, she says - as long as they're the right way round.
"You've got to work out what your commitments are before you work out what you're going to spend - not the other way around," she says.
"It's not a case of 'what have I got left over for my debt repayments'."
Lisa Armstrong, the head of consumer advocacy for mortgage broker Resi, says people tend to fall back into old patterns if they don't change something about their spending behaviour.
She suggests reducing the limits on your credit cards - and resisting offers to move them higher. You should be able to pay off your card debt every month, she says.
Even better, switch to a debit card that has the convenience of a credit card but uses your own money.
Heaven forbid, you might even consider using cash again.
"It's just not an emotional transaction when you hand over a card - it has no meaning to us," Armstrong says. "But when you hand over your hard-earned cash, out of your wallet, you can see what [that purchase] has just cost you."
Money asked the experts to tell us what works and what doesn't when it comes to modern-day debt.
Mortgage redraw
Rather than running up credit card debt at interest rates of 16 or 17 per cent, many people now use their mortgages to fund consumption - a practice that financial planner Suzanne Baldry says is turning mortgages into "residential ATMs".
People draw on the equity in their home, or redraw extra payments they've already made, for spending such as renovations, holidays, clothes, cars and flat-screen TVs.
Alternatively, they consolidate more expensive debts by rolling them into their mortgage.
Baldry says this is fine so long as you're disciplined about repaying that money quickly, rather than spreading it over 25 or so years.
"Not increasing payments to cover this is bad news," she says.
Denis Orrock, of researcher InfoChoice, agrees. He says that doing so spreads a debt that would normally be paid off in three or five years across two decades, adding thousands of dollars in interest charges despite the lower rate (see table, above right).
"Putting debt into the mortgage is a great idea, but you have to pay more," says Lisa Montgomery of Resi.
"You have to pay a lot like you were paying before [when the debt was on your credit cards]."
Personal loans
Orrock says personal loans may be more costly than home loans but they have the advantage of instilling discipline in borrowers.
"Some people do need the discipline of a certain payment every month for a set period to pay things off," he says. "There's a lot to be said for that."
St George Bank's head of consumer lending, Ed Box, says personal loans are much more flexible these days - they can be fixed or variable rate, and some now allow early repayments. He advises tailoring your personal loan to suit your circumstances - for instance, by having the repayment periods set weekly, fortnightly or monthly, in line with when you receive your pay.
Credit cards
A lower rate may not mean you're better off when it comes to credit cards. The consumer group Choice says whether you're better off will depend on the way the interest on overdue amounts is calculated.
You could be worse off if the card charges daily interest on the full, original purchase amount even if some of the balance was repaid on time, or if interest is charged right back to the original purchase date rather than from due date or statement date. Also, you might lose your interest-free period for new purchases if any debt is carried over from the previous month.
Interest-free deals
It's tempting to take advantage of "buy now, pay later" deals but Karen Cox says the Consumer Credit Legal Centre sees a lot of people struggling with very-high-interest debt that started out as interest-free debt. Sometimes no repayments are required at all for the interest-free period, and people take the optimistic view that they'll be able to pay for the goods after the one-, two-or even four-year period.
But that may not happen, or their circumstances may even be worse, Cox says, and the debt ticks over onto a very high rate of interest.
"Others require regular repayments but the repayment you're told to make is based on the standard minimum credit card payment and has nothing to do with paying it off in the interest-free period," she says. "People think they're paying it off but they're actually not. You make a fairly small hole in it on some of them."
Retailer David Jones provides two figures for interest-free options when it sends out its monthly store card statement: the minimum payment due and the amount "payable to minimise further interest charges".
The minimum payment is lower than the amount that would "minimise" interest charges.
Cox says some lenders don't even provide this level of information.
For all those reasons, consumers should think twice before flashing their plastic.
Source: Sydney Morning Herald

Debt reduction, not credit card rates from banks are the big concern

2007-07-09T01:50:00.000-07:00

Credit card rates are the least of Australians' concerns when it comes to managing their personal finances, a survey has found.

Despite the four biggest banks increasing credit card interest rates this year, the factor was on the bottom of the list when respondents ranked their 10 most important money matters in a national survey by NEWS.com.au and polling firm Coredata.

The most important considerations were reducing debts (85 per cent of respondents), planning for retirement (75 per cent) and superannuation (74 per cent), the June survey of 1830 people found.

Only 53 per cent considered credit card rates important.

Anne-Marie Esler, technical research manager with financial advisors Centric Wealth, said while it was surprising credit card rates were a low priority it was encouraging debt reduction was high on the list.

“Personal debt includes amounts owing on credit cards, so hopefully people have considered paying these off in order to help improve their financial situation,” she said.

Interest in investments

Three quarters of those polled believed investments were important, with property being the most popular option (59 per cent), followed by the stock market (53 per cent) and managed funds (42 per cent).

Finance websites, including business news sites and information sites, were the main sources of investment information, followed by newspapers, banks, then family and friends.

Getting advice

Of those who sought advice from banks, less than half - 46 per cent - were satisfied with the information they received. Mortgage brokers fared worse, with just 44 per cent satisfied with their advice.

This compared to 78 per cent of respondents who were satisfied with information they got from websites.

“This result suggests people need to take more time in considering who is in the best position to guide them financially,” Ms Elser said.

Half the respondents said they occasionally sought professional advice on money management while 31 per cent had never done so.

Those with higher incomes were more likely to seek advice.

Retirement

When it came to planning for retirement, 60 per cent of young respondents aged 29 and below said it was important.

“This is a surprising result. It is great to see that so many people under 29 years are contemplating their retirement savings,” Ms Esler said.

“Hopefully these people will also be taking action by having a savings plan either inside super by way of salary sacrifice or taking advantage of the Government’s co-contribution, or outside super through share, managed funds or property investments.”

Those aged 40-49 placed the most importance on a retirement plan (91 per cent), followed by the 50-59 age group (89 per cent).

Credit Fees are beginning to bite

2007-07-07T01:21:00.000-07:00

Credit card fees are increasing and more credit card customers are being hit with penalty fees imposed on their plastic, financial counsellors warn.

With the average credit card debt now nudging $3000, up from $1836 in 2001, more and more card-holders are being hit with late fees, over-the-limit charges and other penalties that can be as high as $40 a pop.

According to Carol O'Brien, a financial counsellor with Lifeline Brisbane, penalty fees make it harder for people to get out of debt and can be the straw that breaks the camel's back in some households.

"When you get caught in that cycle, it's very difficult to get back out again," she explains.

"A lot of our clients get themselves in so deep with massive credit card debt that the only way out they can see is bankruptcy."

Financial counsellors' concerns are backed up by a Reserve Bank of Australia study released last month that showed the total fees paid by households on credit cards rose by 13 per cent in 2006, four times the rate of inflation.

The study also revealed that the banks now raked in more than $1 billion in fees each year from their household credit card operations alone.

With average over-the-limit fees increasing from $18 to $31 (or 73 per cent) in five years and average late penalties up 49 per cent in the same period, even supposedly low-cost cards can morph into "monsters", says Harry Senlitonga, a financial analyst with research firm Cannex.

"Consumers think they are doing the responsible thing by getting a no-frills card but even a few spending and repayment misdemeanours can make any credit card a lot more expensive than anticipated," he says.

Mr Senlitonga calculates that an interest rate of less than 10 per cent quickly balloons out to about 22 per cent over a year if two late payment penalties of $25 each and two over-the-limit penalties of $35 each are incurred.

"Most of us get caught with credit card penalties on the odd occasion but consumers who regularly incur penalty fees due to household budget pressures are building their debt," he says.

Penalty fees are as widespread as they are ruthless. For instance, of the 245 credit cards Cannex analysed in a recent report, only three imposed no fee on people exceeding their credit limits.

Fiona Hawkins, a financial counsellor with Relationships Australia, says anyone thinking about taking up a card offer is urged to read the fine print first, to understand which fees will apply and in what circumstances.

"When you're entering into a credit card contract, you should treat it very much like a complex game of Monopoly," she said.

"If the bank knows the rules and you don't, it's not a fair game, especially if the rules aren't reasonable."

Meanwhile, the Australian Bankers Association claims the average price of banking services in Australia is actually falling.

In its Fees for Banking Services 2007 Report, Kim Hawtrey, associate professor of economics at Macquarie University, notes that "customers are choosing cheaper banking options and the number of transactions continues to increase".

Prof Hawtrey also points out the growth in some fees needs to be viewed in the context of more competitive interest rates, particularly in housing.

But consumer groups are calling on financial institutions to cut penalty fees, in line with international developments.

For example, the British Fair Trading Office last year found that late payment fees were unfair and did not reflect of the cost of dealing with a late payment. Banks were forced to cut their average penalty charges for credit cards by more than half.

Gordon Renouf, manager of policy and campaigns at consumer organisation Choice, says the severity of the penalties imposed by banks in Australia on consumers who pay late, or breach credit limits, are also out of all proportion. They also weigh most heavily on those who already experiencing financial difficulties.

"For some people, it only takes one thing to go wrong with their financial planning and all the cards come tumbling down," he says.

Ms O'Brien advises staying a little under your limit. That way, you won't be tipped over the edge when interest is added at the end of the month.

Choosing a credit card to suit your spending patterns also is important.

For instance, Mr Senlitonga says impulse spenders who use their card for things like shopping sprees, holidays and emergencies should look for a very low rate card with a low or no annual fee.

By contrast, everyday spenders who put all their regular purchases like groceries and petrol on the card, but paid off the balance in full each month, should consider cards that provided extra loyalty features and perks that would be of value to them.

Source: Sunday Mail

Housing costs and petrol both rise

2007-06-05T02:52:00.000-07:00

The TD Securities/Melbourne Institute inflation gauge rose 0.1 per cent in May, giving an annualised rate of inflation of 2.6 per cent.

The rise in the inflation index over May followed a 0.1 per cent rise in April. It was the lowest annual increase in the gauge since March 2006.

The trimmed mean of the TD-MI Inflation Gauge, a measure of underlying inflation, rose 0.1 per cent in May, following a 0.1 per cent rise in April.

The trimmed mean rose by 2.6 per cent over the year to May 2007.

Petrol, housing costs rise

Contributing most to the overall increase in the inflation gauge in May were rises in the cost of fuel, groceries and housing.

The price of petrol rose by 2.7 per cent during May.

Price decreases in audio, visual and computing, bread and cereal products, and holiday travel and accommodation partially offset these increases.

TD Securities senior strategist Joshua Williamson said that while the rate of inflation had eased, the underlying inflation risk remained on the upside.

"The deceleration in annual inflation, as measured by the inflation gauge, fits with the recent pattern of the official inflation data, although there is some base effect with annual inflation moderating to its slowest pace in a year," he said.

"However, inflation is not being held lower by softer domestic demand, but rather the ongoing ability of Asia to export cheaper finished goods and further easing in the price of some services, for example, holiday travel and accommodation.

"These trends have been enhanced by the recent strength of the Australian dollar.

"However, the risks to underlying inflation remain to the upside," he said.

"Domestic demand is robust, global policy rates outside of the US are rising, and Australian households and governments are spending freely in an environment of constrained domestic product and labour markets."

Source: AAP

A third of Australians live payday to payday

2007-05-27T21:39:00.000-07:00

Consumer confidence may be at its highest in more than 30 years, but for many Australians last week's announced tax cuts will have little impact on their day-to-day lives.

A survey conducted by career networking site Linkme.com.au shows that 34.3 per cent of Australians live "pocket-to-mouth".

And while 82 per cent would like to plan their finances better, 43.5 per cent say they did not make enough money to be able to budget any differently.

And for 29.6 per cent in the survey of more than 800 respondents, they say unexpected expenses always get in the way of getting ahead financially.

”Recent tax cuts will not improve the situation for most people and housing shortages and rising rents are just making things worse,'' Linkme.com.au CEO Campbell Sallabank says.

”Housing prices, petrol, bread and milk costs have all sky rocketed whilst salary levels have languished over the past decade.''

Tax cuts help, but more money sought

Tax cuts from July 1 will see a monthly saving of $14.42 per week or $750 per year for someone on an average salary of around $50,000.

For people in the $30,000-$40,000 wage bracket, they will get a slightly higher $21.15 per week or $1100 per year, but for anyone on $25,000 per year of less, they will get just $2.88 per week or $150 per year.

Data released yesterday showed consumer confidence is sitting at its highest since January 1975.

But Mr Sallabank says 24.6 per cent of respondents say they are currently forced to look out for a job that pays more money, while 61.3 per cent say they have to make their lifestyle suit their pay and this means cutting back on luxuries in order to survive.

”The reality is there are tremendous skill shortages in Australia and employees can charge themselves out at a premium,'' Mr Sallabank says.

”There seems to be a great deal of job hopping and no wonder as the pressure to make ends meet is reaching boiling point.''

Source: AAP

Home finance worries as most Australians will experiance financial difficulty in their lives

2007-05-21T16:43:00.000-07:00

Three-quarters of Australians experience financial difficulty Super and home affordability are common concerns.

75 percent of Australians will suffer financial difficulty in their lifetimes, with home affordability a common worry, a survey finds.
Trouble understanding superannuation and not being able to afford the home they want are ranked as the most common concerns.
And not surprisingly, the young are worse off than older generations, says a study by the Financial Planning Association of Australia (FPA), published today.
FPA chief executive Jo-Anne Bloch said young people needed to take control of their finances now, not when they're older.
“Young people need to think about their financial future today, not in 20 years time,'' Ms Bloch said.
“They need to consider salary sacrificing, insurance and good budgeting practice now.''
Financial difficulty widespread The FPA found that of the 1100 people surveyed, 73 per cent of Australians had experienced financial difficulty.
The most common woe was not being able to understand superannuation, with 39 per cent of respondents listing it as a problem.
Being unable to afford a home ranked second, at 35 per cent, while meeting major unexpected expenses (30 per cent), regular expenses (24 per cent) and the cost of education (22 per cent) rounded out the top five.
Credit card concernsCredtt card debt troubled 17 per cent of respondents, and 11 per cent struggled to pay large bills.
Generation X and Y - those born after about 1964 and 1978 respectively, struggled more to meet the cost of housing than older geneations.
The survey found 51 per cent of those between 25-34 unable to afford the home they wanted.
Only 26 per cent of those older than 50 had similar troubles.
Financial tips the FPA recommends include setting realistic financial goals, sparing use of credit cards, sticking to a budget, and shopping around for loans.
The FPA survey has been released to coincide with financial planning week, which begins today (May 21) and runs until May 27.
AAP

Higher interest rates are slowing credit card use

2007-05-04T02:33:00.000-07:00

Applications for new credit cards have fallen for the fourth quarter in a row as shoppers fear further interest rate hikes, a business information group says.
Consumers are instead choosing personal loans, including store finance with interest-free periods, in much greater numbers, the Veda Advantage credit research concludes.
Credit card applications fell 7.3 per cent in the January to March 2007 quarter compared with the same quarter in 2006, down 70,498 applications to 889,396, according to the Vega Advantage research.
The drop represents a 2.2 per cent decrease on the immediately preceding October to December quarter.
Credit surge ends It is the fourth quarter in a row that credit card applications have fallen, down from the all-time high in the previous March quarter of 959,894 applications.
At the same time, personal loan applications rose 7.7 per cent to 745,753 in the January to March 2007 quarter, 53,067 more than in the corresponding quarter of 2006.
That result is a 2.4 per cent increase on the immediately preceding October to December quarter.
Veda Advantage's information services general manager Erica Hughes forecast the two-year surge in new credit has ended.
"This continuing slowdown in the rate of new credit card applications appears to reflect that consumers are increasingly concerned over the high interest rates attaching to the use of credit cards, and of the threat of more interest rate rises," Ms Hughes said.
Overall credit growth was still increasing, she said.
"However, more and more consumers are looking to more cost effective credit products, such as personal loans, to finance their purchases."Source: AAP

Credit card debt worries too hard to swallow for homeowners

2007-04-27T22:29:00.000-07:00

Soaring credit card debt levels spurred by recent interest rate rises are creating financial difficulties for many Australian families.
Leading economist Craig James, of CommSec, said the situation could worsen before it improved.
"If there is a further interest rate rise next month, most people would still get by. But many marginal borrowers using credit cards would be getting much closer to their limits and would need to start making some hard decisions quickly about their budget and personal spending habits," he said
Mr James said that while people were prepared for the first interest rate rise in May last year, the second and third increases by the Reserve Bank had taken most people by surprise.
He said this had tightened many people's cash flow and made them hold more debt on their credit cards for longer.
The average credit card balance is just under $3000, with a total outstanding debt of $28.54 billion on all credit cards in Australia.
In February, cardholders had a record 38.2 per cent of available credit -- the highest amount since records began in 1985.
Australians have taken to the credit card with a relish few other countries can match. .
In 1997, there were 7.5 million credit card accounts in Australia. Today there are 13.4 million. Source: Sunday Herald

Banks boost lending rates ahead of RBA official interest rises

2007-04-16T04:34:00.000-07:00

Aussie retail banks are getting ahead of the Reserve Bank of Australia and are raising fixed lending rates as financial markets price in an interest-rate rise this week.
Major financial institutions are already starting to anticipate a rate hike from the central bank on Wednesday and have marginally shifted fixed lending rates.
Since last week ANZ has moved the one to five-year fixed rate up 0.1 per cent, while ING also raised its three to five-year products by the same amount.
NAB added an extra 2 to 7 basis points to its fixed rates and BankWest and Bank of Queensland have moved higher.
The increases were ordered after the three-year money market rates rallied 18 basis points over the past month on interest rate expectations.
Aussie dollar soars to 10-year highMeanwhile, the Australian dollar has reached a 10-year high as domestic financial markets raise expectations that a stronger economic outlook will prompt the Reserve Bank to tighten monetary policy today.
The prospect of the central bank lifting the cash rate to 6.5 per cent has soared to 65 per cent, after higher retail sales numbers and building approvals spiked sharply.
The 0.9 per cent monthly increase in national spending was interpreted as the possible trigger for the central bank to adjust rates when it meets today.
The dollar shot up following the news and last night was trading at US81.45c, just off its intraday high. The dollar's level has prompted some strategists to extend their forecasts as to how long the currency can stay high.
Overnight, the dollar traded between a low of $US0.8134 and a high of $US0.8180.
BT chief economist Chris Caton said the Reserve Bank would be concerned that higher spending, coupled with greater credit borrowing, would lift inflation.
"The news adds to the impression that the Australian economy is still travelling quite well," Dr Caton said, "although it is not clear to what extent one should allow one's view to be affected by a freak rise in multi-unit dwelling approvals."
Stocks could take a hitThe share prices of the major banks were weaker on the market yesterday, in anticipation of the interest rate rise and the implication it would have for borrowing levels.
The concerns about a possible trade stoush between China and the US injected a fresh bout of nerves into the Australian stock market.
Grange Securities chief economist Stephen Roberts said the share market, at the current heights, was susceptible to potentially negative news from around the world.
"It is a risk to global economic growth," Mr Roberts said of the US situation.
"At the moment it is no more than that."
Source: The Australian

Commonwealth Bank of Australia get credit card swipe slur from Consumer watchdog

2007-03-29T03:06:00.000-07:00

The New South Wales government-backed Consumer Credit Legal Centre has described the Commonwealth Bank as the worst offender in terms of irresponsible credit card lending, based on the cases it sees.
"Commonwealth Bank is over-represented on our case work for irresponsible lending relating to credit cards," the centre's principal solicitor Katherine Lane said.
"In other words we do more matters involving the Commonwealth Bank on irresponsible lending than any other bank." She said that of the cases the centre came across relating to irresponsible credit card lending, most involved unsolicited limit increases by CBA.
Ms Lane pointed to one recent case involving the bank, where a person who was on social security received a credit card limit increase to $27,000.
She also said that the centre's advice line was over-represented by CBA, with people calling in due to financial hardship or irresponsible lending claims.
"Commonwealth Bank is one of the banks that we see most of the financial hardship stuff ... and limit increases that could be argued to be irresponsible," she said.
A CBA spokesman said: "We take responsible lending very seriously and have policies in place to assist our customers to understand the circumstances when these offers are made. Our policies preclude lending to customers on a fixed income and our approval process takes into account customers' past repayment history and ability to repay.
"What that means is that no one will get an offer if they have defaulted in the past or missed a repayment ... they just won't get an offer.
"The people that get the offers have all had sound repayment histories and they have kept within the terms of their credit card."
The latest Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Federal Treasurer Peter Costello met the head of the major banks last year and warned them against lowering their credit standards.
Ms Lane called on CBA to introduce a new code of conduct, similar to that of its rival, ANZ.
The CBA spokesman said that the bank had a hardship service area and that the bank met "everything that ANZ does -- the only thing that we've not done is put it in writing".The Australian.

Source: AAP

Aussies slam credit card surcharges

2007-03-28T03:26:00.000-07:00

Australian credit card holders are not happy about surcharges on credit card payments, with a NEWS.com.au survey showing many people are ditching plastic for cash payments to avoid such fees.
The survey of credit card holders has revealed 46 per cent had used another means of payment when asked to pay a surcharge.
When respondents were asked about alternative payments, the most commonly cited were BPay, cash and EFTPOS.
The survey of of 1678 people was carried out between February 12 and 20 in conjunction with online polling firm Coredata.
Being stung by higher interest rates? Have your say in our online property survey.
The survey comes in response to an increasing number of merchants using surcharges on credit card payments to recoup costs they incur in credit-card transactions.
In recent years, the RBA has removed restrictions on merchants applying surcharges to credit-card payments.
While some consmers still used credit cards when faced with a surcharge - many citing convenience as a reason - other people said they went to different merchants.
"I pulled up in a petrol station and there was a sign saying they charged a surcharge for credit cards, I then drove to the next station down the road that did not," said one respondent.
Consumers aren't happy about other fees associated with credit cards and a whopping 61 per cent of respondents had been stung by fees for either paying off their credit card too late or not paying the required amount.
Of those who had been hit with late fees, 56 per cent said they were a "rip off", another 23 per cent said they were not fair and 22 per cent said they wanted to close their account.
But some respondents admitted self-fault, with 31 per cent of late payers said they were "annoyed with themselves".
Not all consumers are fully informed about their plastic. Many respondents, or about 30 per cent, were not sure of the interest rate on their credit cards.
Fewer respondents (13 per cent) admitted to being unsure of the fees on their card.
But most people (87 per cent) knew how many interest-free days they had on their credit cards.
Of those surveyed, 90 per cent had a credit card and 62 per cent of credit-card holders made full payment on their cards each month.
Recent Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Source: NEWS.com.au

Interest free periods on credit card balance transfers are soon paying the banks a big return

2007-02-21T13:35:00.000-08:00

Many banks are now offering credit cards with a honeymoon period on interest rates for balance of transfers of debt, to entice the most profit type of customer they have, the ones that never clear their balances every month.
Credit cards with honeymoon sweeteners on balance transfers can help you keep to your budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
Credit cards with honeymoon sweeteners on balance transfers can help you keep to you budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
A spokesman, Kerry McMorrow, says it offers customers three cards and each meets specific needs. But the credit union's philosophy is to offer cheap credit with few frills.
Members Equity's MasterCard has a 10.99 per cent rate, a $30 annual fee and a $25 late payment fee. The bank's executive manager, Tony Beck, says there are two groups of customers: those who carry a balance each month and those who pay off their card in full when their statement arrives. If you carry a balance, you are known in the industry as a revolver. If you pay it off, you are a transactor.
"People interested in a low-rate card are the ones most likely to carry a balance forward every month," Beck says. "It's these customers who are the most profitable for the banks. If you are paying your card off on time in full, then you don't really care what the interest rate might be.
"But once the banks get people in on a low rate, then it's very likely those people will end up paying some interest on their card in the future."
Beck says consumers need to watch out for high late payment fees. The fees are charged on top of the high interest rate you'll pay for carrying a balance from one month to the next, once the honeymoon period is over.
Also, find out the reversion rate, or the interest rate that you will be charged once your interest-free period is over. And watch out for over-the-limit fees. Beck says people who accept a low credit limit to keep spending in check may easily breach it, triggering a nasty fee.
GE Money is also luring consumers with a zero interest rate card. A spokesman, Keith Ritchie, says the GE MasterCard has six months interest free on new purchases and 4.99 per cent interest on balance transfers. The deal is only for new cardholders and starts from the time you get the card.
"There are lots of card companies out there doing nothing," he says, referring to the plethora of high-interest rate cards still on the market. "We have been competitive in terms of what we offer customers from day one."
The GE card comes with a $58 annual fee and if you miss a payment, or make a late payment, you'll pay an extra $30.
At the end of the six-month honeymoon period, the zero interest rate on purchases reverts to 9.99 per cent, as does the interest charged on your balance transferred from another card. If you take cash advances, you'll pay 18.49 per cent.
BankWest also has a zero-interest deal on purchases and balance transfers that runs for four months. After that, its reversion rate is 13.74 per cent and its rate for cash advances is 20.49 per cent.
Willink says many people apply for such cards to provide an emergency buffer against unexpected events: "A lot of people think having a low rate card in their wallet would be fantastic for that rainy day. But you also must be disciplined.
"You have to keep making repayments, even when the interest rate is zero, and get the card paid off as soon as possible. If you don't, you will find yourself paying off a debt - a debt that should have been a small debt - for 25 years."

Source: The Australian

Mortgage Interest rates on hold as inflation held in check

2007-02-06T00:29:00.000-08:00

Inflation was unchanged in January helped in part by lower petrol as well as fruit and vegetable prices, a survey showed.
Consumer prices rose 3.1 per cent during the year to January, the TD Securities-Melbourne Institute inflation gauge showed.
The monthly inflation gauge was unchanged in January, following a 0.3 per cent increase in December.
The survey indicates the Reserve Bank of Australia (RBA) may decide to keep interest rates steady when it meets this week. The RBA sets rates to keep inflation between 2 and 3 per cent.
Most economists were surprised when the Australian Bureau of Statistics (ABS) reported that the consumer price index (CPI) fell by 0.1 per cent in the December quarter after petrol prices fell 12.4 per cent.
"Headline inflation continues to decelerate under the well known and well documented price declines in oil and bananas," TD Securities chief strategist Stephen Koukoulas said.
"The deceleration in headline inflation will give the RBA some breathing space when it comes to the next interest rate rise."

Australia's credit card shoppers don't read the fine print

2007-01-24T21:12:00.000-08:00

Credit card shoppers need to boost their awareness of fees and interest rate charges on their credit cards, according to a report and survey conducted by leading bank Citibank.

Almost half of all respondents (48 per cent) to a recent survey were ignorant of the interest rate on their credit card, according to the research by banking group Citibank.

And almost one-third (31 per cent) were unsure how many interest free days they were entitled to after making a purchase.

Citibank's card marketing chief, Madeline O'Connor, said it was important consumers took care.

"We want to encourage people to know the basics on their credit card, after all it's something that is used regularly by many of us," Ms O'Connor said.

The research also found almost one quarter of respondents (23 per cent) were unsure if the interest rate that applied to credit card purchases also applied to cash advances.

A majority also thought women were more likely than men to make impulse credit card purchases, but the items they bought were more practical.

Citibank surveyed 972 people for the study, nationwide.

Source: AAP

Credit cards and personal loans on low incomes the biggest cause of Australia's bankruptcies

2007-01-24T20:45:00.000-08:00

Excessive debt run up on easy credit is causing concern.
The number of people declared bankrupt or entering into agreements with creditors jumped 16.4 per cent last year, with higher interest rates and excessive debt to blame.
The Inspector-General in Bankruptcy, Peter Lowe, yesterday said the number of people getting into trouble with their creditors had been rising since 2002-03. "There has been a resurgence of bankruptcy activity. It is not astronomical but it is happening," he said.
During 2006, 23,840 people went bankrupt while a further 5800 entered formal agreements with their creditors.
The number of bankruptcies peaked at 26,320 in 1998-09, but there were fewer debt agreements then. Creditors increasingly sought a formal arrangement, rather than accepting a default.
Mr Lowe said 18 per cent of bankruptcies were related to businesses, with most of the people involved blaming trading conditions.
The overwhelming bulk of bankruptcies were individuals who had either suffered a loss of income because of unemployment, or had taken on excessive debt.
"A lot of the activity relates to people with low incomes and relatively small unsecured debt," Mr Lowe said.
More than two-thirds had earned an income of less than $30,000 in the previous 12 months.
Credit cards were the biggest problem, accounting for 37 per cent of the outstanding debt, while personal loans accounted for 21 per cent.
Store cards and car finance each accounted for 13 per cent.
The number of bankruptcies associated with people running their own businesses had increased in line with the number of consumer debt defaults.
Although the numbers were rising, Mr Lowe stressed that it remained a tiny proportion, at just 0.14 per cent of the population.

Pre-paid credit cards to be the next big thing

2006-12-18T22:24:00.000-08:00

Pre-paid credit cards could soon become more common than phone cards as providers scramble to meet demand for more flexible payment options.
In recent weeks, MasterCard and Visa have launched a raft of pre-paid cards, hoping to cash in on markets previously beyond their reach - such as children, students and adults who have a poor credit history. Pre-paid cards, which could eventually be available at local convenience stores, allow the user to shop online, over the telephone or in person using credit paid for with cash when the card is purchased.
Users load the card with their desired credit amount, typically less than $1000.
The cards don't require a bank account, and can be given away as a gift, or a kind of electronic pocket money to children, allowing purchases such as music downloads.
Already common in overseas markets - including the US, where they are popular among illegal immigrants unable to open bank accounts - pre-paid cards are relatively new to Australia.
But MasterCard and Visa believe there is growing, unmet demand as credit card-style transactions become increasingly necessary for purchases such as airline tickets, hotel bookings and online items.
Infochoice analyst Denis Orrock says pre-paid cards may also prove popular with shoppers concerned about online security.
"In Australia, they will fill a void for people who want to shop on the Net but aren't comfortable using their credit card," Orrock says.
"With a pre-paid card, you know what you're in for."
MasterCard has launched two pre-paid cards, the Westpac Gift Card, available with pre-paid amounts of between $15 and $800, and the Commonwealth Bank travellers cash card, an ATM card
that allows travellers to withdraw pre-paid cash in foreign currency.
Last month, Visa launched the ANZ Gift Card, following up on its Heritage Building Society card, released in May, and the Visa BoPo, its first general-purpose pre-paid card.
Last month also saw the release of Visa's CashXpress, allowing users to send money overseas, and the Universal Visa Gift Card.
Although they miss out on the interest charges that accrue on a credit balance, card providers make money from the sale of individual cards, which cost around $5 each.
They can also re-invest the prepayments until the money is spent, earning returns on the short-term money market.
Based on US experience, most card users take about three months to spend a balance.
As well, Denis Orrock says card providers can usually bank on small sums of a few dollars each remaining unspent at the card's expiry date, generally around six months after purchase.

Source: Sunday Telegrah

Twelve tips to protect yourself and your credit card from online fraud

2006-12-10T01:58:00.000-08:00

Online banking fraud is on the rise and there are a number of ways you can protect your credit card and bank accounts if you transact over the internet:
1. Keep your computer secure and the access to it;
2. Don't send credit card or account details by e-mail;
3. Reject any email that asks you to follow a link to website and input account details for verification - even if the website looks authentic, its probably a fake replica
4. Make sure you log out of your online account when finished - especially at work, libraries and net cafes
5. Deal only with established and reputable merchants;
6. Only make payments to secure websites - look for the padlock symbol in the bottom-right of your browser and click for details
7. If using a new site, do business first in a small way;
8. Check your accounts and report discrepancies immediately;
9. Ignore the "remember my password option" on banking and shopping sites
10. Change your password regularly;
11. Cancel any card that has been used fraudulently;
12. Read a company's privacy policy before buying online

Credit card fraud on the rise in Australia

2006-12-10T01:27:00.000-08:00

Credit cards are more than ever set to trumpet the title of "fantastic plastic" this Christmas on predictions of a sharp increase in usage and a parallel rise in card fraud.
Spending on cards will rise by close to 25 per cent over Christmas to top the $17 billion mark for the first time, according to research house Cannex.
The sheer scale of usage could generate headaches on repayments and increase the risk of theft or fraud, simply from greater exposure.
Members Equity Bank said yesterday it was encouraging members to be extra cautious when using cards.
MEB head of workplace business Tony Beck said: "Criminals are getting smarter and the incidence of fraud is increasing."
Cannex said the country's 13.1 million-plus credit cards will each swipe about $1280.
Encouraging the use of plastic are discount deals to win debt transfers from competing cards.
In the past six months, Cannex has found eight more cards offering to transfer balances at zero interest on existing debt, making a total of 15 to do so.
A "whopping" 73 more cards offer balance transfers at an interest rate on debt of less than 5 per cent, or better than half the usual rate. A total of 106 cards will offer such a rate.
Cannex reported that "lenders are lining up with their fishing nets ready to catch customers who have maxed-out over the festive season and are searching for an escape route".
To make spending easier, 21 cards were offering an interest rate of less than 10 per cent and 54 had rates under 13 per cent - eight of which did not charge an annual fee; a total of 28 cards were not charging an annual fee.
Cannex research analyst Garfield Wright said people spent up to 25 per cent more in December than they did for the other 11 months of the year.
"For the past three years, Australia's annual pattern of credit card usage has been predictable, with spending soaring in December as credit cards are well and truly given a workout," Mr Wright said.
January, however, was a different story as consumers came to terms with the credit card debt that needed to be paid off.
"There will be a completely different kind of New Year's resolution made this January."
The Australian Bankers Association reminded consumers yesterday that any debt on a card needed to be repaid.
But it said most borrowers did so, pointing to Reserve Bank of Australia figures for the past three Christmas periods that showed borrowers repaid 99.6 per cent of their debt over December and January.
Last Christmas was a good one, with RBA figures showing credit card holders made repayments that exceeded transactions by $638 million.
Source: The Australian, Tim Blue

Australians are spenders not savers

2006-12-03T17:03:00.000-08:00

Most Australians lack a disciplined approach to saving money, but spending it is another matter, new figures show.
A survey conducted for online superannuation fund Max Super found that one in four of the 798 Australians surveyed kept nothing at all from their income to put towards their savings.
Only half of the respondents sometimes put part of their income towards their savings.
Max Super chief executive Andrew Barlow said many Australians were out for instant gratification and were willing to take on debt instead of saving for things in advance.
"This is great when you have years of income ahead of you, but may become an issue upon retirement," he said.
The survey found that three out of four respondents stated that over 50 per cent of their income went towards day to day living expenses.
Mr Barlow said it appeared many people were exhausting their pay packet on their household living costs and credit card bills instead of saving.
"It seems Australians feel confident spending their money, as the unemployment rate is at an all time low and property wealth has increased massively," he said.
The latest official figures show that unemployment fell to a 30-year low of 4.6 per cent in October, and combined with wages growth, the supportive economic conditions have encouraged Australians to spend and borrow more.
Retail spending continued to climb in October, rising 0.8 per cent to $18.372 billion, while credit card borrowings also continued to trend upwards with no sign abating.
In September, Australians had $37.176 billion on credit with credit limits surpassing a total $100 billion for the first time ever.
While the impact of the third interest rate hike for the year in November – which pushed the official rate up to 6.25 per cent – is still to be seen, borrowing for housing has continued to increase, although at a slower rate.
Reserve Bank of Australia figures showed that housing credit grew by 0.8 per cent in October to be up by 14 per cent over the year.
Mr Barlow said that while buying a home was a priority for most people, he said consumers should aim to put aside 10 per cent of their income towards their savings, and split it across both short-term and long-term investments.
"For instance, you might consider saving part in quick access investments for those emergencies in life, while salary sacrificing a component to your super to build up for needs later in life," he said.
Mr Barlow said it was unrealistic to expect people to budget down to the last cent or to deprive themselves of the odd luxury.
"However, what we do encourage is the concept of `paying yourself first' and taking good care of your finances now, for later," he said.
Source AAP

Credit card holders are being dealt a poor hand

2006-10-30T16:01:00.000-08:00

Credit card users who miss an American Express credit card payment will be hit with higher interest rates.
In an Australian first, American Express is applying a form of risk-rating to its customer base that will result in a sliding scale of rates.
Miss one credit card minimum payment, and you lose any promotional rate you were enjoying.
Miss three payments within 12 months and your current rate increases by 4 per cent per annum.
Miss two consecutive payments, or four separate ones within 12 months, and your rate goes up to 25.99 per cent for at least the next 12 months. At the end of that time, Amex has discretion over whether it will lower your rate.
Effectively, the company is relegating those they assess as high-risk to a punitive rate. Or, in Amex's words, "we are setting credit card rates at the customer level rather than the traditional approach of setting rates by product".
This represents a departure from how credit card interest rates have been set in the past. Until recently, if you missed a payment on your credit card, the worst that could happen was you'd be hit with a flat fee. "We'll see the Australian market move to risk-based pricing over time," predicts Denis Orrock of InfoChoice. "Whether it be through a universal change to the reporting structure, to allow ratings agencies to carry it out, or institutions doing their own risk profiling.
"Consumer groups are concerned vulnerable consumers will be hardest hit by the change. Carolyn Bond of the Consumer Law Centre in Victoria says the new Amex policy goes against the industry trend to responsible lending."Amex is going in the direction of penalising people in financial difficulty, rather than looking at different ways they can assist," Bond says. "If you can't afford your payments at the standard credit card interest rates rate [typically about 17 or 18 per cent], then you're not going to be able to afford them at 26 per cent."Cardholders could be locked into a vicious circle of crippling debt with such high rates.
Defaults of 90 days or more affect a person's credit history. "You start to see real problems emerge," says Dr Nick Coates of the Australian Consumers Association. "Customers struggling to maintain everyday expenses with the [recent] interest rate rise and petrol prices will probably start to load up their credit cards first. We've seen cash-outs and credit card debt before the last rate rise at an all-time monthly high, suggesting there are a lot of people under stress. They're the sorts of consumers who will be caught by a sliding scale."Risk-based pricing is common practice in the US, where lending institutions are allowed considerably more access to credit records than they are in Australia.
"One of the reasons we haven't had more discriminatory rates for credit cards is because it's difficult to price risk at the outset," says Nicola Howell, the director of the Centre for Credit and Consumer Law at Griffith University. "That's one of the arguments for more detailed credit reporting."
Orrock says Amex is in effect conducting its own risk profiling. "What you're seeing is that Amex probably wants to cherry-pick their customer base by separating the good from the bad. This is a pretty easy way to roll your default risk customers up into a fairly aggressive interest rate for one year."
Nina Rinella, an Amex spokeswoman, says the company is simply trying to make sure its customers showing responsible payment behaviour are not subsidising irresponsible customers. "The vast majority of our customers have good payment behaviour, and they're not going to be [affected]," she says. Rinella says that Amex is simultaneously offering 60 per cent of its customers, who pay on time, a reduced rate that could be "as low as 12.99 per cent".
There are still some question marks over Amex's new policy.
The NSW Office of Fair Trading is considering the implications of the new policy under the consumer credit code, which imposes some restrictions on default charges.
The company says it is above board. "American Express sought the advice of several leading barristers who agreed that the policy complies with the consumer credit code," Rinella says."Any change in interest rate resulting from our policy is based on a review of the customer's account history ... [and is] made irrespective of whether the customer is in default at that particular time."
Prior to any interest rate changes we would have communicated to a customer multiple times through letters, statement messages, SMS alerts and/or phone calls," she says.
Coates also cites the Consumer Law Centre of Victoria's 2004 Unfair Fees report, which questioned the legality of excessively high default fees."I'm surprised that [Amex] is looking at this already," he says. "I would have thought that there are some issues to be resolved about so-called penalty fees and penalty rates in Australia before these sliding scales could be introduced." The report argued that if the penalty being charged is disproportionate to the actual administrative costs of default and is coupled with unconscionable contract provisions (such as unfair bargaining power), the fees could be illegal.
No one has challenged the banks in court on late fees yet. But there is evidence of a shift in policy in the United Kingdom, with its Office of Fair Trading recently outlawing sliding scale hikes by imposing a low, flat-rate limit on late fees for credit cards.
Andrew Willink of Cannex doubts that many Australian institutions will follow Amex's policy. He likens it to insurance, where customers who make few or no claims are rewarded with lower premiums (and vice versa). "It's a behaviour rate," he says. "If you behave in a regular pattern according to the contract, you'll benefit from the fact that your interest rate is lower."
But the system will introduce more complexity, he says."With finance products now, fees and interest rates are blurring together, so you don't know [the true cost] - and that's the difficult thing," he says.
Consumer groups are concerned the move may prompt other institutions to introduce similar rate hikes."We don't want to see this system being developed in Australia," Coates says. "We believe that it disadvantages struggling consumers who are over-committed with their debt."To avoid trouble, understand all your credit card terms and conditions."
Make sure you're very aware of what arrangements are in place if you do default," Howell says."Research of behavioural economics indicates that people always take a positive view of how they're going to behave.
They don't expect they're going to default, therefore they don't pay much attention to what the default arrangements are. So be realistic about your credit card use."

Source: The Melbourne Age

Credit Complaints on the rise

2006-10-20T05:22:00.000-07:00

The chief credit industry complaint resolution service wants to make membership to it mandatory for lenders and brokers, following a rise in consumer complaints.

The number of complaints from consumers to the Credit Ombudsman Service (COS) jumped to 766 in 2005/06 from 685 in the previous year, a rise of about 11 per cent.

But most complaints, 526, were directed to non-members of COS. Complaints about COS members actually decreased significantly to 271 in 2005/06 from 397 in 2004/05.

This occurred as the number of contacts to COS rose sharply.

Chairman Graeme Matthews said the increased ratio of inquiries to complaints against its members was evidence of the increased effectiveness of its internal dispute resolution procedures.

Mr Matthews said 92 per cent of complaints received last year were resolved after facilitated negotiation or conciliation between the consumer and COS member.

Only 8 per cent of complaints required a determination by the Credit Ombudsman to resolve the dispute.

Mr Matthews said he is concerned about the growing number of complaints about non-members and called on state governments to make it mandatory for credit companies to join an external dispute resolution scheme like COS.

"Unless each participant is a member of COS or another external dispute resolution scheme, the consumer may be left without a remedy.

"This is clearly unacceptable as it hinders comprehensive coverage of the credit marketplace."
The vast majority of complaints to COS in 2005/06 were about standard loans (77 per cent).

About half of last year's complaints were about brokers and just over a third about lenders.
The biggest cause of complaints was a failure of a credit provider to disclose fees or commissions.

By the end of June 2006, COS had 6517 members, up from 5802 in the previous year.

Source: AAP

Is the National Australia Bank about to sell its credit card unit?

2006-10-10T23:47:00.000-07:00

The National Australia Bank won’t comment on speculation it may sell its $3 billion credit card business, prompting analysts to ponder the merits of such a move.
But Geoff Driver, general manager of Australian Foundation Investment Company, said a "review" did not necessarily imply a sale.
He said it would be impossible to judge the merits of any prospective sale without seeing the detail of the propositions.
On the basis that a major bank like the NAB could not operate without offering credit cards, for growing its customer bases and up-selling and cross selling many feel that they would be really thinking about some distribution arrangement.
If a sale were to proceed an overseas player in the Australian banking sector would be the potential buyer, with Citibank, HSBC and GE as possible contenders.
NAB comes last in the big four Australian banks as an issuer of credit cards in Australia, and the credit card offers are ranked poorly compared with the Commonwealth bank and Westpac offerings.
Interestingly, Citigroup have set a goal to take NAB's place as the nation's fourth-largest issuer of credit cards. Competition for market share has driven card interest rates down, trimming the margin that made cards profitable.
Some cards are now available with interest rates as low as 8.99 per cent, well down on the rates of 16 to 18 per cent applying on almost all cards only a few years ago.

Victim nabs suspected thief of his credit card

2006-09-02T16:07:00.000-07:00

A little bit of his own detective work and some luck helped a sharp-eyed victim of credit card fraud catch the man police say charged up a giant TV and several appliances on his stolen credit card.

As Joel Guimares, 25, drove by the Dunkin’ Donuts on Route 9 in Framingham yesterday on the way to work, he recognized the man he watched on a Target store security video recording using Joel's credit card to buy a flat-screen TV, convection oven, coffeemaker and other items.

“I was following the guy, and I was calling the police at the same time,” said Guimares, who lives in Framingham. “He ended up driving by the police headquarters, and they got him there.”

The suspect, Donald Larsen, 34, a manager at a Whole Foods Market, was charged with larceny of property worth more than $250 and credit card misuse.

Guimares got a call Monday from his credit card company about the possible misuse of his credit card. He had lost his wallet at the same Dunkin’ Donuts where he spotted the suspect.

The credit card company told him someone had spent about $2,000 at the Target on Route 30. Guimares said he went there and asked to see the security video recording.

He watched, but did not recognize the man buying the television.

But yesterday, while driving to his job at the Framingham Saab dealership, he recognized the face he saw.

Larsen drove away, Guimares followed and called the police with the license plate number, and Larsen was arrested.

Credit card fraud. What to do if you believe that you are a victim.

2006-07-27T17:03:00.000-07:00

If you suspect at any time that you are he victim of credit card fraud, you need to take immediate action.
It's vital to call your card issuer immediately - all banks will have 24-hour emergency phone lines for this purpose - and explain what's happened and why you feel you have been defrauded.
Also inform the police as this could speed up refunds for any unauthorised use.
If someone else makes a purchase with your card before you inform your bank, the most you will be liable to pay is a token fee. The bank will wear the cost.
However, most banks may waive this fee.
On the otherhand, if you have acted negligently - for example, you've stored details of your PIN in the wallet holding your card - your bank may not refund the money.

Credit cards. Safe ways to withdraw cash from your card

2006-07-27T16:47:00.000-07:00

Credit card owners must remain vigilant with ATM fraud.
Cash-machine fraud was down in 2005. However, the experts agree it's still a substantial problemas the fraudsters' techniques improving.
Typically a fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine.
This is a robbery that you never realise has taken place.
The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit.
Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop.
If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader.
So, when approaching a machine that has other ones beside it, check if all the machines look the same.
What does a card reader look like?
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer.
The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine.
The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with.
This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into.
To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
The safest methods of withdrawing cash with your credit card.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight.
But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.

Credit card smart. How to use your credit card safely

2006-07-27T16:44:00.000-07:00

Nobody plans to be a victim of credit card fraud. But criminals have other ideas, so its important to be mindful of using best practices to minimise the chances of having your credit card account maxed out by others. In particular do the following.

Sign any new cards as soon as you receive them.
Use different PINs for different cards.
Memorise your PINs and do not write them down.
Never give anyone else your PIN details or any other account information.
Remember that your bank will NEVER request details of your PIN or whole passwords, by email or letter or over the phone.
Destroy copies of any receipts that detail your card details.
Regularly check your cards to ensure none have gone missing

Credit card Chip and PIN initiative cuts fraud in the UK

2006-07-27T16:29:00.000-07:00

Nobody can deny that the Chip and PIN initiative has been worth it. According to the APACS, the UK payments association, UK card fraud losses fell by £65 million in 2005 to £439.4 million. Counterfeit fraud - where cards are either skimmed or cloned - fell by 25% to £96.8 million as the chip embedded in new cards offers a higher level of protection. Fraud on a card stolen before the genuine cardholder receives it (which is known as 'mail non-receipt') enjoyed an even sharper reduction in 2005, down by 45% to £40 million, as it has become more difficult for fraudsters to use stolen cards without the PIN.
These changes are long overdue. The UK had been reluctant to adopt Chip and PIN and had acquired the dubious title of 'Fraud Capital of the World'.
However, we can't afford to be complacent. Petrol giant Shell recently suspended Chip and PIN at 600 UK petrol stations after more than £1 million was siphoned from customers' cards. Criminals posing as technicians are thought to have hidden devices to capture PINs inside terminals. The information has then been used to create cloned cards which were used to withdraw the cash.
CNP fraud
Given how long Chip and PIN has been established in Europe, the fraudsters have had plenty of time to investigate alternative options. For example, while the headline figures from APACS are impressive, 'card-not-present' (CNP) fraud (where goods are purchased online, over the phone and by mail order) actually rose by £32.4 million - a rise of 21%.
CNP fraud is a difficult area to manage, as credit cards were never designed to be used in the way that they are being used today, with neither card nor the cardholder present.
So, despite the introduction of Chip and PIN, there are still many other sophisticated ways of getting hold of your credit card details currently being employed by the criminal fraternity. Likewise, there are also plenty of unsophisticated ways for fraudsters to obtain sufficient personal details to obtain credit in your name - for example, by stealing important documents like your passport or driving licence and rifling through your bins.
Online security
The next significant step in further protecting these non-face-to-face transactions will be to use Chip and PIN security for online transactions. This could, for example, involve customers using a Chip and PIN card inserted into a small handheld reader and tapping in their PIN to generate a one-off number to verify each transaction.
Meanwhile, customers must remain vigilant by ensuring that they keep all their account information secret, so that it does not fall into the wrong hands, and to alert their bank immediately if they suspect fraud. It's also worth ensuring your PC is protected with a firewall and antiviral software if you're shopping online.
ATM fraud
By the end of 2005, cash-machine fraud was also down by 12% to £65.8 million. However, the experts agree it's still a substantial problem throughout Europe. Not only are the fraudsters' techniques improving, but there are still many ATMs out there that can't recognise chips and so still rely on the magnetic strip on the back of your card.
The fraudster attaches a card reader to the outside of the slot into which you put your card - these devices can be hard to spot as they look like part of the machine. This is a robbery that you never realise has taken place. The details can lead to a new, fraudulent card with a fresh signature being made, which can then be maxed out to its limit. Many fraudsters will now be out to get your PIN too, and they don't need to be standing looking over your shoulder to do this; they can rely instead on a pin-hole camera that records the PIN you enter on the keyboard.
Pin-hole cameras have a lens as small as a full stop. If one of these is installed into a cash machine, it's unlikely you'll see it, but you may be able to see the card reader. So, when approaching a machine that has other ones beside it, check if all the machines look the same. This works best if you go to the bank that your account is with to withdraw cash, as all the machines for that bank should look the same. Look for any wires or cords coming out of the machine slot.
Card readers
One type of card reader is a flat, flexible piece of plastic that the fraudster will slot into the machine, coming back to pull it out and plug it into a computer. The more common type is an external reader. The slot on the face of a machine that has one of these attached to it will be raised and possibly a different colour to the rest of the parts of the machine. The external reader is glued on to the front of the slot and copies your card as it passes through. Most banks machines have smooth-fronted card slots, not raised, so this is a good indicator to look out for.
Also, be particularly wary if adjoining cash points have 'out-of-order' signs on them, as this can be a ploy to divert customers to the machine that has been tampered with. This also goes for the out-of-order sign on the screen, as a criminal will break a machine that they cannot get a camera or card copier into to get you to use one that they have been able to crack into. To get round pin-hole cameras it's also worth shielding the keyboard with your spare hand as you enter your PIN.
ATMs inside bank branches are very often a safer bet, but one of the safest ways to withdraw cash from your account is to get cashback at the supermarket. Many supermarkets are open 24 hours a day, and the best bit is that the card never leaves your sight. But take note of what's happening around you, never share your account details with anyone and never let your card out of your sight.
What to do if you suspect you are a victim of card fraud
It's vital to call your card issuer immediately - all banks will have 24-hour emergency phone lines for this purpose - and explain what's happened. Also inform the police as this could speed up refunds for any unauthorised use. If someone else makes a purchase with your card before you inform your bank, the most you will be liable to pay is £50. However, according to Cardwatch.org.uk, most banks and building societies will overlook this and refund the total amount. Do remember, however, that if you have acted negligently - for example, you've stored details of your PIN in the wallet holding your card - your bank may not refund the money.
How to use your card safely and securely
1. Sign any new cards as soon as you receive them.
2. Use different PINs for different cards.
3. Memorise your PINs and do not write them down.
4. Never give anyone else your PIN details or any other account information.
5. Remember that your bank will NEVER request details of your PIN or whole passwords.
6. Destroy copies of any receipts that detail your card details.
7. Regularly check your cards to ensure none have gone missing

Credit card signatures 'should be PINs'

2006-07-12T23:53:00.000-07:00

Credit card signatures need to be replaced by a PIN system in Australia to protect against fraud, a parliamentary committee has found.

The House of Representatives economics' committee also wants EFTPOS cards that can be used for internet purchases - just like their credit card counterparts - and the introduction of chip technology.

It follows an inquiry by the committee into credit card changes in recent years, including the overhaul that has enabled merchants to charge customers a surcharge if they use a credit card.

The committee found Australia has fallen well behind other countries in terms of the safety mechanisms available to protect against credit card fraud.

It found in the not too distant future, Australian shoppers overseas may find they cannot use their credit cards because some countries are going towards PIN-identification, ditching the back-of-the-card signature altogether.

"While credit card fraud is comparatively low in Australia, this does not mean steps should not be taken to prevent it," it found.

"The committee considers that a move to PIN-based authorisation would be highly desirable in terms of fraud prevention."

There are also concerns that credit cards are more flexible for shoppers than low-cost EFTPOS cards.

Other countries have gone to systems that enable EFTPOS cards to be used online. In Australia, credit cards are effectively the only internet payment system.

The committee found there was no good reason why EFTPOS cards should not be enabled to let them be used for online shopping.

The advance of chip technology, which can protect cards even better than PIN numbers, was also backed by the committee.

The inquiry rejected claims by banks the reason they had not improved the safety features of credit cards was that they were getting less in so-called interchange fees from merchants.

"The committee does not accept this proposition," it found.

"In the US, technology is even further behind but interchange revenues are three times as high.

"Conversely, technology is more advanced in some debit systems where interchange fees are zero."
Source: AAP, Canberra Australia

New Home sales bounce back

2006-06-22T03:51:00.000-07:00

Australia's housing market staged a comeback in the March quarter as home building activity jumped more than 10 per cent on the back of renewed interest in flats, units and townhouses, figures showed today.

The Australian Bureau of Statistics (ABS) said, on a seasonal basis, the number of new homes and units built were up 10.6 per cent to 39,219 for the quarter.
Over the year, home building was up 4 per cent.

The sharp spike in building activity followed falls in the previous two quarters and occurred ahead of the Reserve Bank of Australia's decision to raise interest rates in May.

The ABS said new private sector housing rose 3.9 per cent to 25,738 for the three months to the end of March.

New private sector other residential building climbed 26.3 per cent to 12,048.

Economists had expected dwelling commencements to have fallen in the March quarter in the aftermath of first quarter gross domestic product (GDP) data.

Commonwealth Bank chief economist Michael Blythe said the strong result indicated the recent slowdown in housing over the last 18 months was shaping up to be one of the mildest on record.

"It's not to say there is another housing boom under way but the housing side of things will not be a huge drag on the economy in the next year," he said.

Malaysia fighting online credit card fraud

2006-06-11T03:57:00.000-07:00

Although the usage of electronic payment in Malaysia is still low compared with developed countries, it is nonetheless a “fast mover” when responding to online fraud, MasterCard International vice-president for operations and advanced payment products (South-East Asia) David Chan said.

He said Malaysia was among the first countries in the world to migrate to EMV (Europay-MasterCard-Visa) cards in an effort to combat credit card fraud.

“Realising that online fraud can cause huge losses, banks in Malaysia are moving fast to equip themselves with more secure anti-fraud codes and devices.

“The rate of adoption by local banks is fast, judging from its size if compared with developed countries,” he told StarBiz after presenting his paper entitled “Banking Technologies and Cost Effectiveness: Migration to Electronic Payment” yesterday.

He added that online authentication was essential for sustaining continued online payments and banking growth.

Chan said online payments globally currently accounted about 10% of the total US$5tril plus e-payments business. He attributed this enormous figure to the rising e-commerce business worldwide.

He said although online fraud was 20 times higher than total card fraud in the US, nevertheless it had declined with the usage of more secure online fraud codes and devices.

Source: Malaysia Star