Charge Is On To Curb Canny Credit Card Customers
Sydney Morning Herald
Monday May 5, 1997
The National Australia Bank announced yesterday a new $1 charge on credit card cash withdrawals, triggering what is expected to be an industry-wide push to use fees to curb the explosion in credit card transactions.
The banks have in their sights the canny customers who use the cards to pay bills and make other purchases but avoid accruing interest by quickly settling their balances. Unlike savings account debit cards, credit card transactions do not attract fees.
The NAB and the ANZ Bank both said yesterday that the big increase in people using their credit cards in this way meant that increased fees were inevitable.
"The level of those who normally have outstanding balances at the end of the month has been declining rapidly over the past six months," said ANZ's chief general manager of cards, Mr Charles Carbonaro.
"Reversing this trend is something that all the banks are looking at right now ... and certain fees are part of that."
Mr Carbonaro said that about one-third of credit card users never paid interest, one-third occasionally had an outstanding balance at the end of the month, and the remainder were constantly in debt.
A NAB spokesman, Mr Haydn Park, said the $1 fee every time a customer got a cash advance from an ATM with a credit card reflected a move to user pays.
The NAB at the same time introduced new fees for foreign currency and overseas credit card transactions.
Mr Park rejected suggestions that it was unfair to charge the credit card fee even though the cash advance would attract interest rates as high as 16 per cent.
"A cash advance costs us more than a normal purchase because the merchant pays us a fee," he said. "This is a move to user-pays; we just want to recover our costs."
Those exploiting the lack of transaction fees on credit cards and avoiding interest were being subsidised by other users, Mr Park said.
"It is unlikely that we are going to do anything in the near-term but as we go down the track, that (user-pays) principle is going to be extended ... it's inevitable."
Mr Carbonaro said the huge popularity of credit card-based loyalty programs - which reward frequent users with free air travel and other goods and services - has fuelled the rise of transactions done on credit to well over one million a day throughout the country.
The convenience of paying for, say, an electricity bill over the phone has also encouraged the use of credit cards.
But rather than building up a credit bill which can attract interest rates of up to 16.5 per cent, "intelligent" users were paying their balances off within the interest-free period of one month that many cards offer.
© 1997 Sydney Morning Herald
