credit card interest

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Forums › Finance and wealth management › credit card interest

heavyusr

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#144254 12-May-2014 20:36

In other countries I read if a credit card issuer raises interest rates a person, by law, can reject the increase and if rejected the persons account will be closed when the balance is paid off. What is the law in New Zealand regarding this?

Kyanar

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#1042648 12-May-2014 20:51

That would be correct. A unilateral contract change would allow you to reject the proposed changes, which would then result in them terminating the contract (which they cannot penalise you for).

However, what would actually happen is that the entire balance becomes due and payable immediately, and you would need to pay it off. This is because the credit contract has been terminated.

heavyusr

83 posts

Master Geek

#1043353 14-May-2014 01:59

Do you have any idea what credit limit a person who has a good credit history but only earns $30K a year would be?

eracode

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#1043355 14-May-2014 02:08

heavyusr: Do you have any idea what credit limit a person who has a good credit history but only earns $30K a year would be?

There are no fixed rules used by the banks and credit card credit is not rationed or difficult to get. Banks almost fall over themselves to give people cards with decent limits.

The limit someone in the circs you described could get would depend not just on their income but on other factors such as whether they have other existing debt of any sort, address, age etc. If no existing debt, they could quite easily get a $5k limit.

I know of an 18 year old with an income of about $30k who applied online and got a $15k limit in her own name. When her parents complained to the bank (about the limit being ridiculously high under her circs and her not being responsible enough, etc) it turned out that she lived at home in a high socioeconomic suburb and the bank had used that as their main criterion for giving her a whopping limit. At the the time the bank could not discuss it with the parents because of the Privacy Act, bank confidentiality, etc. A year on the card had been maxed out and was way behind in payments and her parents had to bail her out. The bank had a lot to answer for here.

It's quite easy to apply for a card online but if it's likely to be a borderline case for the limit hoped for, it would pay to go into a branch in person because branch staff get 'sales points' for credit card sales and you should find them pretty helpful.

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heavyusr

83 posts

Master Geek

#1044904 14-May-2014 16:22

5K limit is pretty low. If I could afford $800 a month could I get a fixed 5 year personal loan from a bank of $30,000?

Bee

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#1044911 14-May-2014 16:33

Heres an idea : Apply to 3 or 4 different banks for $5k limit. Q Card, GE card, Warehouse card... Somewhere around $30k easily with interest rates from 19.95% - 24.95% or more... If you are single with no kids and have no other debt, you will get all cards easily...

You will eventually have a lot of problems when they are all maxed out and need paying back....

If you are actually after $30k for a particular reason, then definitely a personal loan would be the way to go. One repayment and lower interest rates. Repayments should be around $760 yes.

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MikeAqua

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#1044933 14-May-2014 16:54

Ask a bank to give you a revolving line of credit for $30k. Borrow and repay as you wish.

But for any unsecured loan expect to pay high teens interest rates.

Mike

ajobbins

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#1044936 14-May-2014 16:55

Bee: Heres an idea : Apply to 3 or 4 different banks for $5k limit. Q Card, GE card, Warehouse card... Somewhere around $30k easily with interest rates from 19.95% - 24.95% or more... If you are single with no kids and have no other debt, you will get all cards easily...

You will eventually have a lot of problems when they are all maxed out and need paying back....

If you are actually after $30k for a particular reason, then definitely a personal loan would be the way to go. One repayment and lower interest rates. Repayments should be around $760 yes.

Every time you apply for a card, your will get a hit on your credit report. Other providers see this when you apply, and you must be honest in disclosing not only the balance but the limits on other cards. Otherwise you are committing fraud.

The lender will look and your ability to make repayments. They will look at your income and your committed financial outgoings, and will probably assign you a limit based on your ability to make a the minimum repayment if you maxed the card out.

If you had uncommitted income of say $150 a week, they might take half of that (say $75) and work out that you can 'afford' to pay up to $325 a month in repayments. If their minimum payment amount each month is 3%, you would probably end up with a limit somewhere around the $10,000 mark.

Each bank has different criteria, and it all comes down to risk. They might determine you have free income to pay a 10k limit, but based on your age are say at a high risk of unemployment and therefore might offer you only half that, or less. Or they may decide that you own your own house etc so therefore they will give you even more, as you have assets they can come after if you default.

My advise - only apply for what you can really afford, and don't ask for more than you need if you think you're at risk of spending it - even if you can afford it. If you don't need a $5,000 limit, or you would struggle with the payments if you maxed it out, nominate a lower limit.

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JimmyH

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#1045114 14-May-2014 20:33

I know of an 18 year old with an income of about $30k who applied online and got a $15k limit in her own name. When her parents complained to the bank (about the limit being ridiculously high under her circs and her not being responsible enough, etc) it turned out that she lived at home in a high socioeconomic suburb and the bank had used that as their main criterion for giving her a whopping limit. At the the time the bank could not discuss it with the parents because of the Privacy Act, bank confidentiality, etc. A year on the card had been maxed out and was way behind in payments and her parents had to bail her out. The bank had a lot to answer for here.

Personally, I would say that the Bank has nothing at all to answer for. She is legally an adult, on that income living at home with no other commitments it isn't ridiculous to reasonably assume she can support that level of debt, and they haven't forced anything on her.

She deliberately applied for the limit, then she deliberately drew the facility down, and then she failed to arrange her affairs such that she could keep her end of the bargain. If she couldn't manage the repayments, she shouldn't have charged the amounts to the card. The fault is entirely hers, not the banks.

Certainly the bank can't discuss it with her parents. She's an adult and entitled to her privacy. I would have been furious if (say) my parents had gone behind my back to tried and scupper my mortgage arrangements (which I took out when I wasn't much older than she is, and was many times larger than 15K) and the bank had discussed it with them.

mdf

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#1045127 14-May-2014 21:01

heavyusr: In other countries I read if a credit card issuer raises interest rates a person, by law, can reject the increase and if rejected the persons account will be closed when the balance is paid off. What is the law in New Zealand regarding this?

In relation to the first point about changing interest rates (or even the terms and conditions generally), your agreement with the bank about a credit card is a contract, so the rules about changing interest rates are what you agree with the bank. Needless to say, the bank is going to stack the deck in its favour. All of the banks so far as I am aware will have a unilateral right to do what they want, whenever they want.

See, for example, Kiwibank's credit card terms and conditions, clause 3 or ANZ's credit card terms and conditions, clauses 8.8 and 17. Both can change the interest rate or terms and conditions whenever they want (they do have to tell you've they've changed it).

Generally, you do have the right to cancel your credit card at any time though. You don't have to wait for an interest rate hike. You're still up for paying off your balance though.

Kyanar

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#1045195 14-May-2014 22:50

mdf:
heavyusr: In other countries I read if a credit card issuer raises interest rates a person, by law, can reject the increase and if rejected the persons account will be closed when the balance is paid off. What is the law in New Zealand regarding this?

In relation to the first point about changing interest rates (or even the terms and conditions generally), your agreement with the bank about a credit card is a contract, so the rules about changing interest rates are what you agree with the bank. Needless to say, the bank is going to stack the deck in its favour. All of the banks so far as I am aware will have a unilateral right to do what they want, whenever they want.

See, for example, Kiwibank's credit card terms and conditions, clause 3 or ANZ's credit card terms and conditions, clauses 8.8 and 17. Both can change the interest rate or terms and conditions whenever they want (they do have to tell you've they've changed it).

Generally, you do have the right to cancel your credit card at any time though. You don't have to wait for an interest rate hike. You're still up for paying off your balance though.

It's generally accepted that a clause in a contract that permits unilateral modification by one party is considered unconscionable as the other party is usually not in a position to be able to negotiate. The law tends to favour the party at the disadvantage in these sorts of situations. Regardless of the terms written into the contract, unilateral modification always invokes a right of refusal in a B2C contract. The same would not necessarily apply for a B2B contract however, as it is assumed that both parties are negotiating from a position of strength.