Credit card users should take advantage of low-interest cards, balance-transfer deals & interest-free periods, Commerce & Consumer Affairs Minister Kris Faafoi says

Kris Faafoi by Jacky Carpenter.

Commerce and Consumer Affairs Minister Kris Faafoi says banks must only charge credit card interest rates they are satisfied borrowers can repay without suffering substantial hardship, and is encouraging credit card using consumers to shop around.

Faafoi's comments to interest.co.nz come after we pointed out our interview with The Co-operative Bank CEO David Cunningham. Cunningham describes the credit card market as "a real area of customer harm", saying it would be a worthy recipient of a probe by the Commerce Commission under its new market study powers

"I would expect credit card providers to charge fees that are fair and reasonable for consumers. Under the Credit Contracts and Consumer Finance Act, banks can only charge a credit card interest rate if they are satisfied that borrowers can make repayments without suffering substantial hardship," Faafoi said via a spokeswoman.

"I would encourage consumers to shop around and take advantage of low-interest cards, balance-transfer arrangements, and the interest-free period on cards to reduce the amount of interest they pay on credit cards."

Additionally Faafoi said the recent Financial Markets Authority (FMA) and Reserve Bank (RBNZ) report into bank conduct and culture shows New Zealand banks "need to lift their game" when it comes to identifying problems and risks, including in relation to how they sell products.

"I am considering the report’s recommendations on the regulation of bank conduct and will determine if regulations need to change," Faafoi said.

Following the conduct and culture report interest.co.nz argued here that if the FMA and RBNZ are serious about making banks consider their customers' long-term outcomes they could start by taking a look at the credit card market.

Reserve Bank data shows credit card advances outstanding stood at $7.257 billion as of September, having risen 6.1% year-on-year. The weighted average interest rate on personal interest bearing advances was 17.9%, and the weighted average interest rate effective on all personal advances 11%. In 2017 total credit card billings in NZ reached $43.368 billion.

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14 Comments

People could easily utilise balance transfers if they are carrying a card balance/s. 0, 1.9, short term or 5.95 life of loan. In fact people could slice off a small portion of their mortgage and pay less interest than their mortgage.
Of course, one major problem many NZers have in organising their banking now is the 60 to 90 minute ( or more) high wait time when attempting to phone their bank. The main banks often only have 1 person on the phones to cover the entire country!

Don't those credit card deals require you to sign up for more than 6 months?

Part of the issue with this, is often those who are in bad financial shape cannot get approval from another bank to make the balance transfer. In my time working the credit card line of a bank call centre, the number of customers wanting to balance transfer card debt of $20-$30k was ridiculous. And we definitely had more than 1 staff member, more like 100.

I use an airpoints visa, and use my visa for everything possible including as much business expenses as I can. I pay it off every month so I don't get charged any interest. It's really simple. If you can't work it out, you shouldn't be allowed a credit card and maybe Faafoi should put an IQ test on credit card applications.

People with high IQs could be charged higher interest regardless of whether they pay in full each month. This would bring some equity into the system and ensure high IQ folk pay their fair share instead of leeching off everyone else with their interest free cards and high rewards points, effectively receiving unearned income.

Or why not just make everyone who wears glasses, work in the fields like wot they done in Cambodia? Turned out a treat there.....real Equity

I agree, equal outcomes is a sure sign of a progressive society and our soaring inequality is proof that we need a real Woman Leader like Jacinda Adern in charge.

Zachary. My, My, Small things amuse small IQ's

Zachary,

You have stopped taking your meds again,haven’t you? Very naughty of you.

Just to humour you,how exactly would this be done? Would the IQ test be administered by the credit card company or by some other body? What would be seen as a high IQ?

Are you confined,or under supervision in the community? I wish you a speedy recovery.

Agreed this is the correct way to used a card.

It is interesting to see the difference in handing this sort of debt vs interest only property debt. If only one could write the credit card interest component off against personal income it would undoubtedly be more popular.

Go Zac. Smart people should be penalised for sure. Maybe a few whacks on the head with a bat might fix em.

I sincerely wish we had an effective government prepared to change the ongoing monopolistic setup we have where consumers are ripped off.
However us Kiwi consumers have to take lots of the blame. We accept any charges we are given and often just too lazy to do the math.
Maybe we suffer a sort of 'battered consumer syndrome' where we are to punchdrunk with excessive prices to complain. Or we might be suffering 'Stockholm Syndrome' and align ourselves with the commercial pirates who hold us hostage.

.

I also used an airports MasterCard. Milked it hard. 3 or 4 bond payments per year on credit meant free airport lounge entries. Airpoints meant free flights. gave it up though in favour of the TransferWise debit card which provides greater benefits