the mozo blog

As you may remember, a media firestorm erupted last week when Westpac announced it would charge interest on fees and interest on all Westpac Credit Cards. Westpac defended itself by saying this is standard practice among banks — but just how standard is it?

Well, it seems Westpac was right. Across the ‘Big 4′, interest is charged on interest and fees. And they’re not the only ones either, with the likes of American Express, Citibank and St George all guilty of the same tactics.

But this isn’t all — while digging into the fine print about interest and fees, I discovered a myriad of sneaky tricks banks use in charging customers. Forget the trivial feats of magicians and illusionists like Blaine, Copperfield or Criss Angel; for real trickery you need look no further than your monthly credit card statement.

For example, a widespread ace you’ll find up providers’ sleeves involves the specific debts your repayments actually pay off. Most cards’ conditions require your repayments to go towards those purchases that attract the lowest rate. This makes any purchases made at a higher rate more likely to attract interest charges, as they are the last to be paid off.

Another little rabbit in the hat is the date from which interest is charged. Instead of charging interest from the date a transaction is posted to your statement, some providers charge from the date of transaction. While there’s only a few days’ difference, it can add up, especially for larger purchases.

And then there’s the cleverest banking sleight of hand — the ‘prestige’ in magician’s parlance. The typical 44-55 days interest-free period on purchases is often viewed by customers as a breather between spending and interest charges. But quite often this buffer pulls a disappearing act. If your balance is not paid in full by the due date, you’ll lose your interest free days with Commonwealth, ANZ and Westpac. NAB is more lenient, but you still have to maintain your monthly minimum repayment.

So what does this mean for your bottom line? If you lose your interest free days, your bank will levy interest comprising a total of daily interest charges on your purchases going all the way back to the date of purchase. While NAB and ANZ only charge this interest on the overdue amount, Westpac and Commonwealth Bank will charge the 55 days of interest retrospectively on the entire balance, even if minimum repayments are met. What’s more, you won’t get those interest-free days back until those old balances are paid in full. In some cases, such as BankWest, you’re required to pay two consecutive statements in full before they give you this ‘luxury’ back.

In The Prestige, the magician Robert Angier (Hugh Jackman) warns us: “If anybody really believed the things I did on stage, they wouldn’t clap, they’d scream.” I’d be surprised if your next credit card statement was greeted with applause…

Compare credit cards at mozo.com.au

Headlines were made yesterday when Westpac announced it will charge interest on interest charges and fees on all its credit card accounts, starting in June. While media commentators and consumer groups savaged the bank, and the Treasurer labelled it a “serial offender”, the new charges are more or less standard practice — at least among the big banks. So why all the fuss?

On the one hand, as Westpac itself points out, the changes will have a “tiny effect on balances”, apparently 67 cents a month for those affected. Moreover, Westpac is simply coming into line with the other Big 4s – so why single it out for being a late adopter of minimal charges?

The problem is that, at the end of the day, it is another tricksy initiative: fiddling with the fine print to raise revenue without altering the headline rate. And if the net result is in fact tiny, is it really worth the media storm that’s now engulfed the bank?

You have to think Westpac’s PR department has either had a really big St Patrick’s Day or been taken hostage by the bean counters. Consumer sentiment towards Australia’s largest home loan lender is at an all-time low, following its 45 basis point rate rise in December and the subsequent smoothie-fueled furore. Gail Kelly’s leaked comments about rising funding costs – and possible interest rate hikes of a further 30 to 40 basis points – have hardly helped. And profits are already up a third on the previous year, while Westpac was awarded the double-edged title of “World’s most profitable bank” by the famed Boston Consulting Group.

Justifying new charges in a general banking climate of fee cuts is a difficult proposition. At the same time, slamming a bank for catching up to its peers on a minor new charge is more media stunt than serious consumer advocacy.

Stay tuned for our wrap up of sneaky credit card fees — who’s leading the charge, and who simply has bad PR.

Compare credit cards at mozo.com.au

I warned you.  Westpac were off the mark early on Tuesday morning with an aggressive term deposit rate, and I blogged that it would put pressure on home loan rates to increase beyond the RBA.  Bingo!  Westpac was first out with that announcement as well, so clearly they’d planned the whole thing: put out the term deposit good news first to take the sting off the home loan bad news.

St George are matching the Westpac term deposit offer, so no prizes for guessing what their home loan rates will do.

Now watch the other sheep follow the leader.

Compare home loans at mozo.com.au

Compare term deposits at mozo.com.au

The new Westpac Ignite Credit Card launches today, replacing the much loved Virgin Credit Card held by over 750,000 Australians.

Westpac is promoting the Ignite Credit Card as everything the Virgin card is, and more. But will the new Westpac card really ‘ignite’ the imaginations of all those ex-Virginites?

And if you’re an ex-Virgin customer, should you stick with the Ignite Credit Card or look around for a better deal?

You can see how Ignite stacks up against the rest of the market with our quick Compare Credit Cards tool. Just select Westpac as your lender and Ignite as your card.

Or read on for the Mozo low down on whether Ignite is a dud or a deal.

Westpac Ignite Credit Card Pros:

• Still promises no annual fee… ever (great to see they’ve kept this promise)
• Still has a low interest rate of 12.99% (but beware the cash advance rate is 17.74%)
• Still up to 55 interest free days on purchases
• Added chip security to protect your card against fraud
• No changes to your credit card number or payment method

Westpac Ignite Credit Card Cons:

• No more funky card colours: just one boring red card design. We can’t help thinking they’ve missed a trick here – how many cardholders would have stayed with Westpac just to keep their purple, pink or black plastic?
• No more funky Virgin brand: the cheeky cut off corner is gone and the Ignite Credit Card looks pretty much the same as any other card. Solid. Respectable. Not exactly the sort of brand that will appeal to many Virgin customers.
• No more Mates Rates rewards: Westpac has promised it’s own ‘Instant Offers’ program but details are sketchy.

The good news is that if you’re after a combo of low rate, no annual fee and interest free days, the Westpac Ignite Credit Card is definitely one of the best deals around. But you can do better with the mecu Visa credit card which offers a purchase rate of 11.99%, no annual fee and 55 interest free days.

If you’re paying interest on your credit card balance, then you’re likely better off switching to a card with a lower interest rate and a low annual fee. The BankWest Lite card offers 0% on balance transfers for 8 months and a low ongoing rate of 10.99%, with a $59 annual fee. This card also has an ‘Instant Discounts’ rewards scheme.

Alternatively the Aussie MasterCard offers a 12 month introductory rate of 9.99% on purchases and 5.99% on balance transfers. The ongoing interest rate is 11.74% and the annual fee is a respectable $49.

And finally, if you’re all about great looks over cost, then check out the NAB Low Rate Visa in silver or pink and the cute little NAB Visa Mini in a choice of 5 colours.

Compare credit cards now with Mozo.