Cheap credit cards new front in mortgage war

BNZ offers cut-rate credit card benefits to home owners with a BNZ mortgage and less than 80% LVR

11th Nov 13, 9:46am by David Chaston

BNZ has introduced a linked home loan and credit card.

Its HomeAdvantage MasterCard features a purchase interest rate that is the same as BNZ's "Standard/Fly Buys" variable home loan rate of 5.99%.

It also features a zero annual account fee, including no annual account fee for an additional card.

Standard credit card interest rates offered by BNZ are 19.95%, and their 'low rate' offers have previously been 13.25%.

In addition, it 'earns' Fly Buys points. (In fact, until 30 April 2014, you can get double Fly Buys points with the HomeAdvantage MasterCard. And any purchases you make at Z and Noel Leeming, will earn you triple Fly Buys points.)

If you use it at an ATM to get a cash advance, it will still incur a more normal interest rate of 15.95% - although this is a significant concession from their usual 22.20% ~~20.20%~~ rate.

At the same time BNZ has launched a "Low Rate" Mastercard, featuring a 12.95% normal purchase interest rate. This is less than their "Lite" Visa card of 13.25% but the Lite Visa product is no longer available for new customers. However, both these low rate cards come with a $60 annual fee charged as $5 per month. By way on comparison, most Classic BNZ credit cards incur an annual charge of $30 (billed as $15 every six months).

To be eligible for their new HomeAdvantage card, you will need to have any type of a BNZ home loan with a loan-to-value ratio (LVR) of 80% or less, plus a BNZ transaction account that your main income is paid into.

Both the BNZ home loan and HomeAdvantage must be for personal use (not business use). And to keep HomeAdvantage, you must maintain your BNZ home loan and transactional account.

This latest product launch is part of an overall shift by banks to reward and attract mortgage clients who have more equity than the RBNZ 'speed limit' restrictions. Banks are competing for such customers hard, and excluding those with an inadequate equity level from their enticements.

See all carded, or advertised, bank home loan rates here.

You can see all current credit card interest rates and conditions here

The two new BNZ credit card products can be summarised as follows:

BNZ HomeAdvantage Mastercard
Purchase interest rate	5.99%
Cash advance rate	15.95%
Annual account fee	$0.00
Joint account annual fee	$0.00
Balance transfer rate, for 6 months	5.99%

BNZ Low Rate Mastercard
Purchase interest rate	12.95%
Cash advance rate	22.20%
Annual account fee	$60.00
Joint account annual fee	$12.00
Balance transfer rate, for 6 months	5.99%

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12 Comments

by KH | 11th Nov 13, 10:22am 1384118526

About time. All credit cards should have a rate of around 6%. And knowing of course that the bank charges merchants a percentage of your transaction in addition.

by Money Man | 11th Nov 13, 10:10pm 1384161055

You have no idea how risk pricing works with that kind of statement.

So you think the risk profile for credit cards is about the same as residentially secured housing loans?????

Some 101 lessons:

1. About half of all card holders pay their balance off in full each month so the amount of interest they pay is nil.

2. After that for every month payments are in arrears there is an increased risk of write off due to non payment.

I remember seeing some figuires that suggested if an account was in arrears by 6 months the likelihood of a total loss was about 50%.

At 9 months it had increased to something like 90%.

That is why interest rates on credit cards at at that level: to cover the high level of write offs, most of which are totally unsecured.

The Merchant Fees are in part to cover the cost of operating the payment system, not to cover card issusing banks for losse on cardholder accounts. Most of the fees goes to Visa and Mastercard International operations, not the individual banks which business process their cards payments through.

by MortgageBelt | 11th Nov 13, 10:21pm 1384161696

Banks will of course still pursue debt through debt collection and through the courts despite credit cards being 'unsecured'. So credit card debt is not simply wiped - apart from hardened cases.

By arrears I assume you mean 'late payment', not simply carrying a balance but still maintaining minimum payments?

50% + of card-holders do carry at least some 'balance' therefore paying interest on this - plus they will then pay interest on all new spending & cash withdrawals while they have an accrued balance.

20% interest is exorbitant in this era of ZIRP.

Some cards are charging 25 to 27% - store cards etc.

This is reaching 'payday' loan interest.

The Merchant fees more than cover the 'cost' of ,say, allowing a merchant to receive a credit card payment into their cheque account. Once setup on a website for example the banks charge constant percentages according to the volume. So as pointed out the banks get income streams from downstream and upstream!

by Money Man | 11th Nov 13, 10:58pm 1384163910

Arrears is non payment or part or all of the payment due.

Yes they go for collection but there again its a cost with no guaranteed repayment.

Credit cards tend to be at the end of list for people to pay once in arrears / default.

Rent, Food, Power and HP for the car to get to work are further up the queue hence more chance of no recovery.

Providing someone meets the minimum payment on due date facility is in order.

Totally agree that store cards and like (GE etc) we rates are up to 29% plus are way out of order but then again they might provde a card whereas a bank may decline (comes back to that Risk profile again).

Bank rates for cards seem to be between 11% to 19% range with differing annual fee structures as well.

Yes Banks do get income stream from both Cardholder and Merchants but play two differing roles for each.

I have also seen businesses negotiate hard on their merchant fees as well especially those with high volumes of high $$$ transactions.

by KH | 11th Nov 13, 10:58pm 1384163891

So what is the actual loss moneyman. I know there has to be some. But is it large. Don't think so.

by Money Man | 11th Nov 13, 11:02pm 1384164159

I don't know the losses for individual banks or card issues but suggest an amount of 3% to 4% of total outstanding / portfolio would not be out of the norm.

Anyway why do you think Credit Card rates should be 6.00%.

Be interested in your rationale???

by KH | 12th Nov 13, 5:37am 1384187835

4%. No. For a start -such clients would have been screened from the system years ago. Maintaining at 4% would be disfunctional.

6%. Cost of sourcing funds and a big margin.

by steven | 12th Nov 13, 7:03am 1384193032

Well in the US my understanding was, CCs typically used to be 7~8%....because of competition I guess. After the GFC I think its gone up somewhat, but still for was is a debt that they mostly have as a secured loan ie your house 17%+ (23%+) is crazy.

regards

by Zoltuger | 11th Nov 13, 2:31pm 1384133511

There seems to be a big push by Mastercard in NZ. This BNZ card and the new Kiwibank (Air NZ) cards are both Mastercards and Westpac doesn't seem to issue Visa cards any more.

Any ideas why?

by Money Man | 11th Nov 13, 10:14pm 1384161298

No but I understand ASB doesn't issue Mastercard for any new cards, just Visa so maybe they are reacting to this??

by MortgageBelt | 11th Nov 13, 7:14pm 1384150459

If you are carrying credit card balances then you should balance-transfer your way out.

Westpac have a BTR of 5.95% forever - like a 30 year fixed rate!

ANZ have a 12 month BTR of 2.99%

Kiwibank have a BTR of 2.99% rate for 6 months.

GE - Gemvisa have 6 month interest free rate for any purchases over $250.

So if you have accrued CC debt, don't passively sit on 19.95% or even 12.95%.

As Suze Orman says - don't carry cc balance. However, if you do, then balance transfer your balances while paying it off.

In fact at these rates - it's almost worth shaving off a few portions of your mortgage e.g. $20k or so and getting one of these BTRs.

by powerdownkiwi | 12th Nov 13, 9:28am 1384201709

There should be no credit cards.

Only debit.

Same goes for loans. There shouldn't be any, and in the transition phase, there should be no interest charged. We've passed the peak of quality energy flow, by some years. We're down to where the biggest outfit on the planet (a) will never meaningfully 'repay' its debt, and (b) can't stop 'printing money'. We're down to fracking rock, kerogen and offshore phosphate. The underwrite ahead is not what it was behind.

Time some folk discussed the paradigm change in terms of the future, not getting back on the bandwagon that was the past.