Banks deciding they don't want people to use Credit Cards as much anymore? (Letter from Bank)

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Forums › Finance and wealth management › Banks deciding they don't want people to use Credit Cards as much anymore? (Letter from Bank)

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#2814118 17-Nov-2021 00:16

So if I top up my PokerStars account I’d have to pay a cash advance fee under this?

Are they not already making money through foreign exchange charges, plus PokerStars possibly has to pay fees as well.

Also if draw money out, it has to go to the same card it was paid from, so drawing money out wouldn’t reduce debt on card, still have same debt as before deposit to Pokerstars, as the withdrawal goes back to same account paid from.

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rugrat

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#2814119 17-Nov-2021 00:20

Another example, topping up a mobile phone. On Skinny I can transfer minutes or data to another account. Someone else could give me cash in exchange.

eracode

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#2814136 17-Nov-2021 03:46

WyleECoyoteNZ:

May have to look at other options, e.g debit card, taking my banking elsewhere.

Given the way banks operate in NZ, I’ll bet my bottom dollar that Westpac won’t remain an outlier on this - they’ll either drop it or the other banks will start doing it too. Probably unlikely that it will remain a point of difference between banks.

It’s a bit hard to dispute the logic on this - at least for the obvious transactions. The arguable part is where the cut-off is - for less-obvious transactions - what’s caught and what isn’t. And perhaps most importantly, will we know at the outset that a particular transaction is caught - or will we find out only when we see the monthly statement?

Sometimes I just sit and think. Other times I just sit.

Handle9

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#2814137 17-Nov-2021 04:02

Senecio: Sounds perfectly reasonable to me. If you’re topping up an online account (eg. TAB) you’re not making a purchase. Effectively you are withdrawing cash from your credit account and depositing it in another account. Therefore they are treating it like a cash advance.

I’m only surprised it hasn’t been locked down previously.

Buying a quasi-cash product is not a cash advance or depositing it in another account, its buying a service or product from another merchant. Providing it's legal the nature of the product is not the banks concern. They get their merchant fees and any interest that is payable.

It's a cash grab, I'd tell them to stick their cards and make a great deal of noise about it.

Handle9

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#2814138 17-Nov-2021 04:03

nztim: The reason they are doing this is

People with CC debt are topping up Lotto , TAB or PayPal accounts, draw down on them and then paying back the credit card

When you pay down a card it goes to the oldest transaction first, therefore eliminating internet bearing transactions and banks lose legitimate interest they are entitled to.

So by charging interest immediately and at the cash advance rate it deters this behaviour

They aren't "entitled" to anything. Interest isn't "legitimate" or not. It is a commercial arrangement.

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#2814139 17-Nov-2021 04:05

Talkiet:

It's interesting. I cannot fathom that a bank, with all the regulation on them, will have done this on a whim - but not even including a proper definition of quasi-cash, who determines it, and a method for appeal of such definitions smacks of a hurried process. I'm going to ask them tomorrow for a proper definition of quasi-cash and process for determination/appeal, and when they refuse, I'll make the request in writing CCing the banking ombudsman.

Cheers - N

I'd suggest cc'ing the media as well.

GV27

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#2814142 17-Nov-2021 06:32

Handle9:

Senecio: Sounds perfectly reasonable to me. If you’re topping up an online account (eg. TAB) you’re not making a purchase. Effectively you are withdrawing cash from your credit account and depositing it in another account. Therefore they are treating it like a cash advance.

I’m only surprised it hasn’t been locked down previously.

Buying a quasi-cash product is not a cash advance or depositing it in another account, its buying a service or product from another merchant. Providing it's legal the nature of the product is not the banks concern. They get their merchant fees and any interest that is payable.

It's a cash grab, I'd tell them to stick their cards and make a great deal of noise about it.

100%. Are they going to distinguish between me topping up my MyLotto account and when I do it after I've already selected the ticket I want to buy?

If I never 'top up' the account and only use the card when I'm buying a ticket, then that's no different to me swiping an EFTPOS card at a Lotto kiosk in a store.

Why one should functionally incur an extra fee or be arbitrarily deemed as two transactions for the point of collecting an extra fee is garbage.

Dulouz

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#2814144 17-Nov-2021 06:35

I guess a billion dollars profit just isn't enough these days.

Amanon

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#2814145 17-Nov-2021 06:36

I can see the sense of doing this, and I suspect most banks already do - with a smaller set of transactions. If I was with Westpac I'd certainly be concerned about their vague and broad definition of 'quasi-cash.'

My bank's terms and conditions include this sentence: "Cash-like transactions, such as the purchase of gambling chips or foreign cash, are treated as cash advances." That's also a bit vague, but at least it's a reasonably narrow definition. I've never incurred immediate interest after purchasing the likes of store gift cards or topping up mobile phone pre-pay accounts.

Edited to add: it's now in the media - https://www.stuff.co.nz/business/126989708/westpac-raises-interest-rate-on-credit-card-payments-for-gambling

sbiddle

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#2814163 17-Nov-2021 07:44

Despite the fact I'm not a Westpac customer I've been following the quasi cash plans since they were announced in September. The planned introduction has already been pushed out twice and clarifications made regarding the terms and conditions which IMHO are still pretty vague.

I think calling this a cash grab or other such things is actually incredibly unfair on Westpac, but the implementation of this should be of concern for people.

It should be noted that quasi cash transactions have been treated differently by credit card companies and banks for several years now, with quite a few changes around gambling transactions.The extension of the quasi cash rules by Westpac is merely an extension of this.

In recent times we've also seen interchange rates slashed. After ignoring interchange rates for their first term the govt also promised before the election to slash these further, but like their petrol inquiry that seems to just be all hot air. The cuts that in interchange that have occured has meant the profitability of cards (and individual customers) has been cut quite significantly. Some cards have now seen caps on some card schemes with Airpoints earn as an example now capped.

People have been exploiting credit cards as interest free short loans for shares and crypto because they've been able to buy shares or crypto and then pay back the card after the interest free period. You can argue all you want about whether this is good or bad but you need to take into consideration the fact that banks are under significant increasing pressure by regulators and the government to stop risky loans and to ensure they understand their customers. The CCCFA legislation Michael linked to above is actually pretty significant.

The rewording of Westpac's quasi cash however is concerning because it's so vague. Other banks made their definition of quasi cash pretty clear, however Westpac have not done this leaving it pretty much open to interpretation. There has been some (unconfirmed) suggestions that Trademe topups will also be affected by this.

I don't personally have a problem per se with quasi cash being treated as a cash advance providing the definitions are very clear, but that's where the real issue starts.

When you have a cash advance on your credit card interest starts accruing immediately and is calculated daily on those transactions. There is no easy way to identify quasi cash transactions with some banks, and neither is there a way to know exactly how much you need to pay back.

If you purchase $100 of Lotto tickets online with Westpac you are going to be charged interest calculated daily on that $100 until it's paid in full. But there is often no easy way to know how much that is - let's say you forget to transfer that immediately. The next day you're going to need to transfer more than $100 to cover the purchase + interest but have no real way of knowing exactly how much you need to pay back to cover this.

Things are now made more confusing because when you do transfer money back to your card it may not necessarily be used to cover the cash advance first - if you have other fees (such as a six monthly card fee) or are already accruing interest on other card transactions the money you just transferred will be applied to these first and NOT the cash advance. If you happened to have a card statement that had (for example) a $75 half yearly card fee on it and you purchased $100 of Lotto tickets and immediately transferred $100 to your credit card you'd still be accruing interest daily on $75 of the Lotto transaction which is accuring interest at the cash advance fee and many people would be completely oblivious to this and would have no way of actually seeing this looking at their credit card statement.

I can see a lot of people getting into trouble with these changes..

alasta

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#2814237 17-Nov-2021 08:41

WyleECoyoteNZ:

I'll admit, I'm a little annoyed by it. I use my CC to top up my snapper (about $40 per week). I'd use a Self service kiosk, but they are few and far between.

The Snapper example worries me.

You are thinking of Snapper as a 'stored value card' and therefore 'quasi-cash'. For me Snapper is just a way to pay for my bus use - i.e. no different from purchasing any other product or service.

This is a good example of why quasi-cash needs to be very clearly defined.

Dulouz

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#2814240 17-Nov-2021 08:54

No more Timezone

Amanon

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#2814251 17-Nov-2021 09:06

I can understand banks doing this specifically to meet anti-money laundering or problem gambling legislation. Anything above that should be done on a per customer basis. They already have sophisticated fraud prevention systems in place, so this feels like a conveniently lazy solution that penalises even those that are not abusing the system.

cruxis

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#2814257 17-Nov-2021 09:12

I guess Buying a xbox series X on credit card is now considered quasi-cash, as its easily converted to cash within hours.

GV27

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#2814287 17-Nov-2021 09:44

insane:

I can understand banks doing this specifically to meet anti-money laundering or problem gambling legislation. Anything above that should be done on a per customer basis. They already have sophisticated fraud prevention systems in place, so this feels like a conveniently lazy solution that penalises even those that are not abusing the system.

Yes, also singling out MyLotto even though it's overseen by a Government department and has built-in gambling lockouts seems like a cop-out.

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