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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#2814783 17-Nov-2021 18:52

cokemaster: On the crypto front, the two dealers I use, require AML info (eg. Drivers license, bank statement etc) to get onboard. I regularly sell Bitcoin and had to go through those loops initially.

It’s worth noting that debit cards can still be used for these purchases moving forward. There is a few references to AML and social implications… having studied the area a bit, there may very well be another factor: risk. Debit cards involve your own money whilst credit cards effectively leverage the banks money. It’s pure speculation but I’d hazard a guess that credit card users who heavily use those services are likely to be at a higher risk of default.

Proof of ID is fine. The issue is banks trying to charge interest based on what you are buying.

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#2814788 17-Nov-2021 18:54

Interest is priced largely by risk. There is a reason why home loans are cheaper than personal loans which are cheaper than credit card debt.

All of them involve the same dollars but each one has a different failure profile when aggregated up.

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#2814799 17-Nov-2021 19:06

cokemaster: Interest is priced largely by risk. There is a reason why home loans are cheaper than personal loans which are cheaper than credit card debt.

All of them involve the same dollars but each one has a different failure profile when aggregated up.

That's a commercial decision for the bank, just as refusing to accept it is for consumers. I don't accept that this is a risk based decision, it's a profit based decision.

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#2814858 17-Nov-2021 20:13

BNZ looks the simplest. When look up cash advance:

”Cash advance fees are charged when you use your credit card to withdraw cash in NZ from an ATM, over the counter at banks, or electronic transfer funds from your credit card account through telephone or Internet Banking.”

No mention of gift cards etc, just straight cash from ATM, counter, or transferring money from internet banking.

And for cash rewards on card:

”

Rewards are earned on eligible purchases, which exclude cash advances, balance transfers, interest charges, bank fees, gambling, betting and lottery transactions, and unauthorised transactions for which you are not liable.”

I’m fine with those conditions, and it all looks fair enough to me.

Gift cards, transport cards, seems like others are trying to take the Mickey.

tripp

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#2815179 18-Nov-2021 12:02

Doesn't really stop the problem, There are a number of ways already for a "cash advance". 1 example is buying something from a store and then returning it (unopen). I have done this in the past and was able to pay by credit card but have the funds refunded to my eftpos card. The credit card sees it as a purchase yet you get the refund onto another card.

Another good way around things like this. Arrange with bank 1 to get a credit transfer (1 of those no interest for 6 / 12 months on balance transfer) include the max amount of your current credit card, do a cash advance on the current credit card to pay off a loan, have the balance transferred overnight to the new card and now you have a interest free loan for 6 / 12 months. This is how I paid off my car and saved a snot load of money on interest.

There are always ways around this kind of thing and people will always find it. The main issue i see with this change is that people will now be confused on what is a purchase vs cash advance and places like mylotto are really going to have to explain this when charging a credit card etc.

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#2815188 18-Nov-2021 12:15

Some of this is sensible prudence to prevent clients over-leveraging and exposing the bank to additional risk.

I would be surprised if this policy is intended for or applied to NZ transport cards as some have suggested.

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#2815200 18-Nov-2021 12:30

tripp:

Doesn't really stop the problem, There are a number of ways already for a "cash advance". 1 example is buying something from a store and then returning it (unopen). I have done this in the past and was able to pay by credit card but have the funds refunded to my eftpos card. The credit card sees it as a purchase yet you get the refund onto another card.

Have to admit that I have done this (i.e. refund going to cheque account rather than back to CC) - but only in the case of a genuine return of the item. Problematic for the retailer because they still pay the Merchant Fee on that transaction to the CC company but have ended up with no sale revenue. If the refund goes to the credit card, their Merchant Fee is refunded.

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

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#2815205 18-Nov-2021 12:42

eracode:

tripp:

Doesn't really stop the problem, There are a number of ways already for a "cash advance". 1 example is buying something from a store and then returning it (unopen). I have done this in the past and was able to pay by credit card but have the funds refunded to my eftpos card. The credit card sees it as a purchase yet you get the refund onto another card.

Have to admit that I have done this (i.e. refund going to cheque account rather than back to CC) - but only in the case of a genuine return of the item. Problematic for the retailer because they still pay the Merchant Fee on that transaction to the CC company but have ended up with no sale revenue. If the refund goes to the credit card, their Merchant Fee is refunded.

Don't get me wrong I have only done this twice for real returns, I just notice that it did not have to be on the same card as a purchase.

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#2815219 18-Nov-2021 13:22

Honestly I think there needs to be some regulation around this one. It needs to be clear to a card holder what they will be charged for a transaction without the need to lookup an updated list on the banks website. Unlike a Cash Advance fee this is very murky and I'm glad I'm not a current westpac customer.

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#2815383 18-Nov-2021 17:36

tripp:

Don't get me wrong I have only done this twice for real returns, I just notice that it did not have to be on the same card as a purchase.

Yeah this is a huge failing in the use of refund cards on machines for refunding.

Not even supposed to check that the card is the same, have to ask the customer and trust them since touching a customers card is a no-no

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#2815386 18-Nov-2021 17:39

gzt: Some of this is sensible prudence to prevent clients over-leveraging and exposing the bank to additional risk.

I would be surprised if this policy is intended for or applied to NZ transport cards as some have suggested.

Where is there any evidence that this is related to risk? It seems that you are making an assumption rather than what the bank has said.

It is very hard to see how buying $10k of Lion Red is less risky for the bank than $10k of shares.

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#2815393 18-Nov-2021 18:14

Indeed. We can only read between the lines.

From a risk perspective, crypto currency, gambling, futures/fx and shares can be quite risky. At least with physical goods, they can be sold (albeit at a material loss). Buying the wrong share or crypto coin - you could be left with nothing.

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#2815398 18-Nov-2021 18:35

cokemaster: At least with physical goods, they can be sold (albeit at a material loss). Buying the wrong share or crypto coin - you could be left with nothing.

A credit card is unsecured. It's not easy at all for the bank to force you to sell things bought with the card.

That risk is of course priced into the extremely high interest rates charged on credit cards.

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#2815399 18-Nov-2021 18:41

cokemaster:

From a risk perspective, crypto currency, gambling, futures/fx and shares can be quite risky. At least with physical goods, they can be sold (albeit at a material loss). Buying the wrong share or crypto coin - you could be left with nothing.

Rightly or wrongly, the risk that @gzt and others are talking about is ‘risk to the bank’. You appear to be responding to those comments but you’re talking about the purchase of risky assets by the card holder - which is a totally different thing.

The banks are not bringing in these charges to deter purchasers from purchasing risky assets and to protect purchasers from themselves - that’s not the issue.

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#2815400 18-Nov-2021 18:46

Handle9:
gzt: Some of this is sensible prudence to prevent clients over-leveraging and exposing the bank to additional risk.

I would be surprised if this policy is intended for or applied to NZ transport cards as some have suggested.

Where is there any evidence that this is related to risk? It seems that you are making an assumption rather than what the bank has said.

It is very hard to see how buying $10k of Lion Red is less risky for the bank than $10k of shares.

That's true. I made an assumption there. Other than a risk element it does not make much sense to me. As you might point out, Westpac is not banning those items named in the letter. Westpac will charge the cash advance fee and cash interest rate. It is possible the higher rate is in response to risk profile. Maybe entirely they decided these items are equivalent to cash loans and decided to capture that in T&C for their own benefit. Maybe a combination of the two.

Imo this will not apply to everything named by posters so far. Yes, Westpac is leaving plenty of wiggle room to add any random things in future if they so decide. I suspect Westpac could have made this change any old time and the letter is a courtesy.

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