Five-fold Friday: The best kind of spending; ASB's fee friendly vanilla Kiwisaver; Overseas pension tax traps; Top 5 business flix of the decade

A slight change in my usual unstructured structure. I have decided to substitute real-estate for KiwiSaver as my third personal finance item. With apologies to those who aren't invested with KiwiSaver (or who don't care) but with 1.7 million enrolled I expect there should be a few for whom this space is hopefully worth reading. There's no shortage of material for property hounds on our website.

Also, I would like to thank readers (who are starting to come out of the virtual closet) for emailing me directly with your comments, quips and tips for the sake of our new  personal finance section. I love hearing from you (enjoy the incendiary comments on the site) and strive to provide an informative, interesting and mildly entertaining weekend read.

Amanda

1) Savings and spending

Journalists are an odd bunch. Cynical, bitter, self-absorbed with an entirely negative view of the world and its inhabitants. Delightful spouses we make. Ask my ex. Those who don't fit this stereotype are either ill-fitted for the profession or haven't been in it long enough. So it was with an uncharacteristic swelling of my heart (kind of like that Grinch who returned x-mas to Whoville) that I absorbed the news of a NZ$5 million donation to the children of Christchurch.

The mystery donor requested the money go to the kids of the shattered eastern suburbs where all manner of recreational outlets for the kiddies were destroyed, including the hugely popular QEII, a weekend refuge for parents and their hyper children.

Upon hearing just how grave the situation was in Christchurch, the donor apparently said:  "Are the kids OK? Is there anything I can do to help the kids?"

And with that wrote a big fat cheque for NZ$5 million.

Stories like this warm my cold heart and make me feel somewhat less jaded about life. Kudos to this mystery philanthropist for exemplifying the best kind of spending there is charity.

2) Credit and debit

Last week we took a look at what minimum repayment on the credit card will cost over-time and discovered some ugly truths as well as exposing the worst peddlers of "dumb debt.'' The dogs (as measured by the lowest minimum repayment rate and thus the longest shelf-life for prompted repayment): Westpac, The Warehouse, BNZ and ANZ. The darlings (again in terms of forced repayment time): Kiwibank, TSB and Diner's Club.

Our interest rate watcher Suhaimi also put our institutions to the test on their balance transfers to see what would happen if you didn't pay that balance off in the designated six month window. This is a financially painful exercise if you aren't diligent about paying off the debt on time.

Bottom line: if you go this route red circle the six month cut-off on every visible surface around, or else set up automatic payments to ensure that balance gets paid off without delay. Thanks to KM for replicating these tables for me at 4:55pm on a  Friday and Suhaimi for the research.

Credit cards minimum payment tests

Cards type
Standard Visa/Mastercard

Balance Due $2,000
Repayment Pay off debt by paying minimum monthly repayments
(The greater of $ or % of the closing balance of credit cards statement)

Test 1 - Paying minimum repayments

Test 2 - Monthly settlement of $100.00 per month
Balance Due
Repayment

Balance transfer tests
1) Transfer the balance due of $2000.00 to another bank using balance transfer facility
2) Keep paying minimum balance
3) No new debts adding to the present outstanding balance

Balance transfer data

Test 1 - Transfer to ANZ @ 2.99% for 6 months

Note:
Westpac/Warehouse cardholders will save $2697.60 if they are using ANZ balance transfer facility of 2.99% for 6 months and keep paying minimum amount (>2% or $5)
Other banks cardholders will be in a losing position if utilising ANZ balance transfer facility and keep paying minimum amount.

Test 1 - Transfer to ANZ @ 2.99% for 6 months

Note:
Westpac/Warehouse cardholders will save $2697.60 if they are using ANZ balance transfer facility of 2.99% for 6 months and keep paying minimum amount (>2% or $5). Other bank cardholders will be in a losing position if utilising ANZ balance transfer facility and keep the paying minimum amount.

Test 2 - Transfer to BNZ @ 8.95% for 6 months

Note:
ANZ/Westpac/Warehouse cardholders will save $4,339.46 if they are using the ANZ balance transfer facility of 2.99% for 6 months and keep paying the minimum amount (>2% or $25). Other bank cardholders will be in a losing position.

Test 3 - Transfer to Kiwibank @ 4.99% for 6 months

Note:
ANZ/Westpac/The Warehouse card holders will get the maximum saving using Kiwibank BT facility of 4.99% for 6 mths as they have to abide to Kiwibanks's higher min repayments of (>5% or $10).

Test 4 - Transfer $2000 to Westpac @ 5.95% for LIFE

Note:
Low interest rate of 5.95% for life is a key point minimising interest charge. (even at a lower minimum repayments of (>2% or $5)
ASB, Kiwibank, Diners Club, Amex, TSB cardholders will take longer period to settle $2000 debt, but minimising interest charge.

Test 5 - Transfer to National Bank @ 2.99% for 6 months

Test 6 - Transfer $2000 to The Warehouse @ 5.99% for 6 months

Balance transfer key points
1. Balance transfer rate, the lower the better
2. Check the duration of balance transfer facility
3. Beware of the standard interest rate after the introduction period is over.
4. Balance transfer offer is only valid to the transferred balance, not to additional/new debts
5. Balance transfer facility serve as a vehicle to accelerate debt repayments, not as a tool to add more debts
6. Using balance transfer facility and higher scheduled repayments will minimize interest charged.
7. The best action is to choose the lowest BT rate and pay off debt during the introduction period.

3) KiwiSaver

Pulled a fund out of the hat and came up with ASB's Conservative Fund. Let's look at performance to begin with.

According to our before-tax but after fee performance calculations, this vanilla fund is ticking along on par with other default funds in its category.

Since inception, it's delivered an annual return of about 4.7%. If you've invested more recently, you'll be less thrilled. In the last six months, it's returned 2.4%, and in the last year 5.5%.

At last count the fund had NZ $874.3 million under management. Fund manager? Sorry, it'll take more time than I have to unravel. It's managed by a "multiple."

So what are you invested in? For the most part, cash and bonds-- both international bonds than NZ. See our graph below for an exact break down.

In terms of performance, compared to its peer group, this fund isn't too badly. Over a three-year performance period, we ranked it as No.9.

On the fee side, this fund is friendly. It's expense ratio (that's all the various fees, expenses and fixed dollars fee on a $10,000 balance) work out to .70% putting it at the low end of the fee spectrum. At the high end, just to give you an basis for comparison, they range from 1.25- 1.5%

Click here for the fund's asset mix

4) Death and taxes

I was interested to learn that 25% of New Zealanders were born somewhere other than Aotearoa. A good number of those will likely have spent time paying into pension funds that they'll need to transport or reclaim at some point. Tax specialist Terry Baucher, in his maiden column for interest.co.nz, looks at some of the tax risk involved with foreign investment funds.  If you've got a superannuation somewhere else or foreign investments, believe me you'll want to read this. You can find Terry's column along with our other regular and guest columnists in our  new personal finance section  here.

5) Books and film

If I had to choose the top 5 business film of the decade, I'd be browsing Video-Ezy aisles for a long time I suspect. Business flicks usually don't have mass appeal and I haven't yet discovered Auckland's equivalent of Alice's in Christchurch which stocked a wide range of alternative (no not porn) films. Still the times, they are a changing and the Global Financial Crisis has given birth to more juicy material than screenwriters know what to do with.

Here's the top 5 as nominated by Picktainment. BH will be pleased to see the Social Network made the cut as he couldn't stop raving about it for weeks. I wasn't so taken with it but really only watched with one eye as was trying to install lights on my bike at the same time. Surprising that the Oscar winning "Inside Job" didn't make this list, which wins interest.co's banking editor's vote. I would add to this list "Enron: The Smartest Guys in the Room,'' and also "The Corporation," both documentary style films that leave you feeling... like a journalist.

Hmm, maybe not such great viewing after all.

Here's some you-tube video clips of my picks.