Banks challenged to reveal credit card payback times

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Retirement Commissioner Diana Crossan wants banks to tell their customers how long it will take them to repay credit card debt at the minimum amount in their monthly statements.

She issued the challenge today at the commission's Financial Literacy Summit in Wellington.

"I want to issue a challenge in public to be the first lender that makes that change in New Zealand," she said. Credit card providers typically require payment of only 5 per cent of outstanding balances, allowing high interest rates to be charged on the residual credit card debt.

Crossan also complained the shift of financial literacy education to the Ministry of Education two years ago hadn't worked, with other initiatives achieving greater priority.

"I call on the government to shift funding financial education along, and to stump up the cash to make sure it happens," she said.

Crossan said the finance sector, educators and public service have achieved many successes in getting New Zealanders more literate about their savings and retirement, with the national savings rate positive for the first time in decades.

Still, more needs to be done, such as making it easier for people to understand how long debt takes to pay off, she said.

Financial literacy got a fillip last week when Westpac Banking Corp. teamed up with Massey University to help fund a new personal finance education centre.

The initiative will see the university offer programmes to educators to inform people about the basics of saving and investment, and will also pay for a 20-year study into changing levels of financial literacy.

To help push the case for more education, Crossan said the Retirement Commission is in the process of commissioning a report to "quantify the impact of financial literacy on New Zealand."

Earlier in the conference, Annamaria Lusardi, economics professor at Dartmouth College in the U.S., said changing patterns in retirement savings meant people needed to be more financially literate.

She's part of an international study into people's understanding of personal finance.

One of the global shifts in retirement savings was the greater responsibility on the individual to prepare for their superannuation.

"There's increasing individual responsibility (moving away) from government and employers, and to the individual," she said.

Adding to the pressure for increased planning was 2004 research showing people who planned for their retirement had three times as much wealth as those who didn't, she said.