Overdue credit card bill, missed loan payments: Why are Kiwis so bad at managing their bank accounts?

Kiwis frequently miss payments or were going into an unarranged overdraft. Photo / File

Up to 40 per cent of New Zealanders have regular problems managing their bank account payments leaving them stung by fees and interest costs.

Research based on the accounts of around 600,000 customers with the ASB and their transactions over the past year found many had gone into an unarranged overdraft, were late paying their credit card bill or making home or personal loan payments on time.

ASB chief executive Vittoria Shortt said the percentage was high and it was an ongoing challenge for the bank.

"I don't think it is well enough known how many and the extent to which people have challenges managing their financial affairs."

She said for some people it was because they were busy or struggled to keep on top of life admin, admitting that had caught her out at times in the past.

"We don't wake up in the morning thinking how are we going to manage our financial affairs today - that is not what a lot of people do."

She said others could be having real difficulty managing the balance between what they were earning and what they were spending.

The research found around half of its customers spent more than they earned in February.

While Shortt admitted not all customers had all their income coming into the same bank she said the February shortfall could be due to people having tax bills to pay or hangovers from the Christmas and holiday period.

"It can be lots of reasons but we are trying to shine a light on people keeping an eye on their spending - and really understanding what that looks like for them.

"We are in a rising interest rate environment, a high inflation environment so the more we can do to shine a light on this the better."

The bank's economists have already forecast the average family could face an increase in costs of $150 a week this year as the cost of living increases.

Shortt said rising costs could be catching a lot of people out.

The bank has been trialling ways to head off people going into an unarranged overdraft or missing payments.

Customers who went into overdraft for two days of the previous month were emailed or received online messages with tips on how to avoid doing so in the future by setting up automatic payments, reminders or alerts.

That had seen around two-thirds avoid going into overdraft again.

It was also sending out similar reminders for credit card payments.

First home buyers

Shortt said the bank was also concerned about how first home buyers would handle the rising interest rate environment.

First home buyers who bought in the past 18 months did so during record low interest rates.

Shortt said while ASB "stress tested" all mortgage lending at a higher interest rate than the advertised home loan rate, many of those customers had never experienced a rising interest rate environment.

"On the one hand when we have been helping out first home buyers there is a discussion around interest rate cycles but we do know some people will have hoped the interest rate cycle will have stayed lower for longer.

"For some first home buyers this is clearly not going to be good news for them and so it is all about getting on the front foot. It is putting in the plan before it happens."

She said the bank was contacting first home buyers up to six months before the fixed term of their loan ended.

Shortt said it was not just talking about higher mortgage costs but higher expenses elsewhere.

"We are contacting them to help make sure they have taken some time to understand what rate they might go on to. What might that mean for their budgeting. Also talking about inflationary impacts and how that might play through."