Like it or not, cheques are nearing the end of the line. Photo / Getty Images
OPINION:
Q: My BNZ branch advised me recently that from July 2021 they will not issue chequebooks to customers. Is there a bank in New Zealand that will have them after that date, as I will transfer all my accounts plus term deposits to them ASAP?
Besides a date to stop — or even better, not to stop — would they also tell you how many cheques a day they process to verify the 55,000 per day I read a while back?
A: First, I think you've misunderstood what you were told — or perhaps the banker got it wrong. BNZ has already stopped issuing chequebooks, although you will be able to deposit and write cheques until July next year.
However, a spokesperson says, "We'll be working with customers and other stakeholders over coming months to ensure they have alternative ways to access banking services by the time the phase out is complete."
Not happy with that? Our table shows that your best bets if you want to switch banks are SBS and TSB. But, as an SBS spokesperson points out, while that bank has no plans to stop issuing chequebooks, "The phasing out of issuing and accepting cheques by competitors will mean our customers will be unable to use cheques as a form of payment if the competitor banks don't accept them." And the Ministry of Social Development reports that New Zealand Post, Inland Revenue and ACC are all no longer accepting cheques.
At TSB, a spokesperson says, "We proactively work with our customers to support them to use our online and mobile banking services as an alternative for cheques. During Covid-19 lockdown our people happily spent up to an hour on the phone getting customers up to speed with digital banking technology."
Wherever you turn it's the same story. You're going to have to take the bull by the horns and learn another way of paying bills, perhaps online. It's not difficult — honestly. After the first few times, you'll be breezing through it.
In my survey of the banks, I asked them to briefly explain what they were doing to help customers adjust to the demise of cheques. Most banks were so keen to list all of their activities that I could half fill this column with them. The word "briefly" got a bit lost.
Suffice to say, every bank says it is working hard on this. Among the more unusual assistance, Kiwibank says, "We offer a programme of Tech Teas in branches, where customers can have a cup of tea while we upskill them on how to use internet banking. We also fund DORA (Digital On-Road Access), a bus which tours the country delivering digital banking classes."
On how many cheques are still in use, I'm not sure that numbers per day tell us much. But several banks reported that they make up less than 1 per cent of the payments processed, and that keeps declining. Cheerio cheques.
Q: In a recent answer, you referred to "cheque and savings accounts". With electronic transfers, increasingly "cheques" are no longer used.
Kiwibank no longer uses this term, and increasingly such accounts are no longer linked to a "chequebook". Should we be seeking a more appropriate name when referring to such accounts?
This change was brought home to me a few years ago when new tenants — a young professional couple — wanted my bank account number to start rent payments. I pulled my chequebook out to get a deposit slip from the back. They were amazed to see a chequebook and wanted to know what it was.
My son has a birthday cheque from my mother which he is keeping as a souvenir. He reckons he will get more for it as a collectible item than its face value.
A: I love your stories. It's fun to see the older generation puzzling the young ones for a change — over an old-fangled tool!
Good luck to your son. It might take a few decades for his collectible to be worth much.
But in any case, it's sure to have value to him as a symbol of grandma's love.
On the names of accounts, I'm sure the banks will take care of changing the names.
Q: I am soon to receive an inheritance of $50,000. I want to ensure I manage this wisely. I am considering my investment options. However, it is likely I will need this money in two to three years to purchase my own house.
Is it worth investing for such a short duration, especially considering the current global financial outlook, or safer to keep it in the bank?
A: Any money you plan to spend within three years is best put in bank term deposits or a cash fund. In anything riskier, the value might fall right before you want to withdraw the money.
That's true regardless of the global financial situation. Time and again, big downturns come out of the blue. This year's Covid plunge is just one of many examples.
Cash funds are the lowest-risk managed funds — both in and out of KiwiSaver. If you're under 65, choose a non-KiwiSaver fund so you can withdraw money whenever you want to. Over 65 you can withdraw from either type, and KiwiSaver funds tend to have lower fees so you might as well use one of those funds.
Access is one advantage of these funds over term deposits. Another is that they are PIEs, so tax on your returns is a bit lower. You do have to pay fees, though.
For information on cash funds — in and out of KiwiSaver — go to the Smart Investor tool on sorted.org.nz and choose "Defensive funds". Within that group, look for funds with "cash" in their names.
The returns given there are after fees. They fluctuate a bit — click on "Details" under the returns section for each fund. And unlike term deposits, you don't know what future returns will be. But at this low-risk level, returns are unlikely to change much from the recent past. And — because cash funds are a bit more uncertain than term deposits — they are likely to give slightly higher average returns after fees.
If you prefer to stick with bank term deposits, check interest.co.nz to see which bank is offering the best interest rates.
Q: Last week, one of your correspondents suggested investing Bonus Bonds proceeds into a term deposit and using the interest earned to buy Lotto tickets, as a way to "keep the money" and still have a flutter.
True, but they miss the point that the person who simply compounds the interest instead of buying Lotto would, on average, be much better off. It is as simple as knowing the Lotto odds that, on average, one spends more than $300 to win Lotto's minimum monetary prize of about $25.
The suggestion made reminds me of another letter published in your September 26 column titled "An offer so great, you just have to hang up". I guess all those receiving money back from Bonus Bonds will need to be alert to the "Do I have a great deal for you" approach from others, including from Lotto.
A: I think you might be the one missing the point!
You're quite right, that compound interest in a term deposit — albeit at pathetically low current rates — beats Lotto on average.
But recent letters have been about the fun people get from an investment that gives them a chance of winning big — even a tiny chance. For many people that fun is part of the return, and they're willing to give up a higher monetary return to get it. Read on.
Q: Further to your question re other banks that offer prizes — now that Bonus Bonds are closing down — the Co-operative Bank has a prize winner account in which they give away a Mini every month. It's nowhere near as much as Bonus Bonds but I imagine the odds are greater.
Like many of your readers, I have loved Bonus Bonds and put in around $35 a week. I found it slightly arrogant of some of the financial big-wigs to mock people's love of the non-interest-earning Bonus Bonds.
For me it was a fun alternative to actually losing money on Lotto every week. And at least every day, despite the infinitesimal chances, there was always a possibility that I could go to the letterbox and open an envelope saying "You have won a million dollars!" (or in the end, an email).
A: Years ago, when I was a newspaper reporter, a budget adviser who worked with people on really low incomes told me she didn't suggest these people stop their weekly Lotto flutter. "It gives them a bit of fun and a ray of hope — for not very much money," she said.
Life is not all about dollars.
You're right about the Co-operative Bank. It offers "the monthly prize of a Mini Cooper for those customers that have a Prize Draw Saver account with us," says a spokesperson. "For every $100 of a customer's average daily account balance, they get an entry into our monthly draw — so the more they save, the more chances they have to win." Until October 31, the bank is also offering a $2020 prize draw.
"This is a limited promotion we are running for customers who join and open an everyday or savings account with us. Existing customers are also automatically eligible. We have one draw each week for six weeks — it's a way to try and make 2020 a little bit better for us all — by adding a dollar sign in front of it!" She says the odds of a win are low, but "in comparison to winning big on Lotto or winning the million dollars with Bonus Bonds they're pretty good!"
Q: A recent letter in your column was regarding not updating your tax status when you retired, years later correcting it with IRD, and getting a refund for the extra NZ Super you had missed out on.
That is my case as well. But although I have been enjoying the new rate since May, the person I was dealing with made no mention about applying for a backdated refund.
I was always under the impression that if you did not claim correctly, that was your problem. Put it right, but no backpay! Have I been wrong? Should I now apply for backpay of over two years?
A: Probably. Says an Inland Revenue spokesperson, "Everyone's circumstances are different, but if someone believes they've had too much tax deducted they might be entitled to a refund.
"For the 2019 and 2020 tax years customers are automatically assessed, and Inland Revenue now checks automatically (auto-calc) to see if they're entitled to a refund at the end of each income year.
"They can, however, check to see if they've paid too much tax. To check if they were entitled to a refund from previous years, they would need to check if they had requested a Personal Tax Summary (PTS) for those previous years. There was no requirement for a PTS from this group of customers pre auto-calc, as it was assumed they were taxed correctly from source."
She adds, though, "If a customer wants to retrospectively request a PTS they need to be aware of the following: "IR can't issue a PTS after four years have passed since the end of the income year in which it would apply.
"When requesting a PTS a customer is liable for the outcome."
In other words, if you go through this process and find that you owe tax, you must pay it.
But still, it might be worth a go for you. So how do you go about it?
"For a customer to check if they have a refund due in previous years, they can log in to myIR and do the calculation to determine any refund or tax to pay and request the PTS. Alternatively, they can call 0800 257 777 to request a PTS through our self-service options 24 hours a day, 7 days a week."
Good luck. Let us know if you get a refund.
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
The Reserve Bank will this week deliver a new set of forecasts for where rates are headed.