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
Saturday, November 10, 2007
Saturday, October 27, 2007
Payday lenders are subjected to inquiry
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
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
Monday, October 22, 2007
Beating credit card bankruptcy in Australia
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
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
Sunday, October 21, 2007
Household debt in Australia on the rise
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.
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.
Thursday, October 18, 2007
De facto couples are 'risking financial ruin'
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
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
Wednesday, October 10, 2007
Americans turns to credit cards in the aftermath of the recent mortgage meltdown
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
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
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
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
Sunday, August 12, 2007
Major banks sales targets a debt burden on consumers, says finance union.
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
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
Saturday, August 11, 2007
CREDIT WARNING: NAB at it again! National Australia Bank [NAB] forcing borrowers to the wall
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
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
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
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
Wednesday, August 01, 2007
Men more likely to default on credit than women
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.
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.
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.
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.
Monday, July 23, 2007
Credit Card record highs of no concern say credit card suppliers and retailers.
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
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
Thursday, July 19, 2007
Credit Card debt average now over $3,000
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
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
Sunday, July 15, 2007
Platinum credit cards are top of the line
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
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
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
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
Friday, July 13, 2007
Credit card debt reduction always a good idea
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
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
Monday, July 09, 2007
Debt reduction, not credit card rates from banks are the big concern
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).
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).
Saturday, July 07, 2007
Credit Fees are beginning to bite
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
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
Tuesday, June 05, 2007
Housing costs and petrol both rise
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
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
Sunday, May 27, 2007
A third of Australians live payday to payday
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
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
Monday, May 21, 2007
Home finance worries as most Australians will experiance financial difficulty in their lives
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
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
Friday, May 04, 2007
Higher interest rates are slowing credit card use
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
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
Friday, April 27, 2007
Credit card debt worries too hard to swallow for homeowners
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
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
Monday, April 16, 2007
Banks boost lending rates ahead of RBA official interest rises
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
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
Thursday, March 29, 2007
Commonwealth Bank of Australia get credit card swipe slur from Consumer watchdog
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
"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
Wednesday, March 28, 2007
Aussies slam credit card surcharges
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
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
Wednesday, February 21, 2007
Interest free periods on credit card balance transfers are soon paying the banks a big return
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
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
Tuesday, February 06, 2007
Mortgage Interest rates on hold as inflation held in check
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."
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."
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