Credit-seekers' wings trimmed

By PATRICK GOWER

Getting good credit just got harder for more than 200,000 New Zealanders as two of the big banks cut the number of interest-free days on their popular credit cards.

ANZ Bank has dropped the number of interest-free days on its QTAV card from 55 days to 44 after a similar move by competitor BNZ with its GlobalPlus card.

Both cards are linked to loyalty programmes that help users to build up "points" to use on associated goods.

Consumer advocates are worried that the trend will spread to other banks and credit cards.

The "loyalty-card" or "rewards-card" market has so far proven hugely successful in New Zealand, combining credit services with air points for airlines, discounts on other products, or in some cases cash payouts.

The director of banking studies at Massey University, David Tripe, said the banks had encouraged people to spend more on the credit cards and deliberately changed consumer behaviour but were now saying they were not prepared to stand behind it when the numbers on their own balance sheets did not add up.

Mr Tripe said there was good reason to be sceptical of the reasons given by the banks for the change, as there was no evidence in the Reserve Bank statistics to suggest people were paying back their credit cards any more quickly.

"The amount of outstanding interest-bearing [credit] on our credit cards has not changed - that is an unequivocal fact," he said.

"When you look to the figures and find contradiction it is easy to get sceptical about the reasons they give, and it has to be a further concern that this will soon happen at other banks and with other cards."

All the major the main banks have similar credit cards linked to loyalty programmes, but when the Herald spoke to them they denied they had plans to trim back the number of interest-free days on any of their credit products.

ANZ spokesman Steve Fisher said the QTAV (Qantas Telstra ANZ Visa) card was being used as a "debit card instead of a credit card," with over half of the customers paying the balance in full before they were charged any interest on each bill.

"Basically people were chasing their rewards by spending up large on their cards, and paying it back so they would not get charged interest. As a moneylender, we don't recoup anything," he said.

The shortened interest-free period for QTAV cardholders will begin on May 1. Most BNZ cardholders have been lumbered with the shorter period since last month.

Neither ANZ nor the BNZ would say exactly how many customers would be affected, citing commercial sensitivity, but both said they had more than 100,000 cards out on the streets.

BNZ spokeswoman Carol Young said the bank hauled back the interest-free period for GlobalPlus cardholders because, like the ANZ, it had to get back some interest if it wanted to keep offering the rewards.

ANZ charges a flat rate of 17.5 per cent interest on its QTAV card.

The BNZ has a tiered interest rate of 14.95 per cent and 19.45 per cent for purchases on its GlobalPlus card.

Both banks said the shortened interest-free period would not spread to their other credit products.

Consumers' Institute chief executive David Russell said there was nothing illegal about what the banks had done.

He said people who had changed their spending habits needed to be aware of the shortened interest period, or even be prepared to get their chequebooks out again at the supermarket.

"People just need to be aware that the banks are simply protecting their interests, and doing so by taking the benefits away from the consumer."