KEY POINTS:
The Bank of New Zealand has lifted its interest rate for cash advances on its Lite Visa credit card by more than 50 per cent.
From February 1 cash advances will be charged at 22.2 per cent, up from 13.75 per cent. Purchases on the low-rate card will continue to be charged at 13.75 per cent.
Readers have contacted the Herald about the move, with one describing it as "brutal". Another said he relied on this line of credit as an overdraft for his business.
A BNZ spokesperson said credit card cash advances were riskier to the bank than credit card purchases.
"By introducing a separate rate for cash advances we are recognising the different level of risk."
Cash advances accounted for less than 2 per cent of the bank's credit card transactions, the spokesperson said.
The BNZ's move appears to match the policy of its competitors. ANZ also charges 22.2 per cent interest for cash advances on its Low Rate Mastercard and has done for some time.
A spokeswoman said it reflected the bank's policy of "rewarding the right behaviour", as it did not encourage its customers to use their credit cards as a source of cash. Purchases on the card are charged at 14.9 per cent.
Westpac said it had had a separate interest rate for cash advances on its Low Interest Mastercard for four years. The rate for purchases on the card is 14.10 per cent.
Kiwibank does not differentiate between cash advances or purchases on its Low Interest Mastercard, charging 13.3 per cent interest on both.
Spokesman Bruce Thompson said the bank had no intention of changing this policy. "It's part and parcel of what we regard as a better deal. Our credit cards have always been regarded as the most competitive in the market."
