CBA Boss calls for ban on 0% Balance Transfers

[exceladdict]

Thought this may be of interest to some AFF'ers - heard it on The World Today yesterday but it didn't get picked up by mainstream news.

MATTHEW COMYN: The Commonwealth Bank does not currently offer zero per cent interest rate balance transfers. The experience here, and in other markets around the world, is that customers increase their debt and many do not pay off the debt before the end of the offer period.

It has been our view that such arrangements are not the right thing for our customers. We believe the committee should consider a total ban on zero per cent balance transfers, a move that would have our full support.

LINDY KERIN: And during this exchange with the committee's independent Senator Nick Xenophon, Matthew Comyn agreed zero per cent transfers can see debt spiral for some customers.

MATTHEW COMYN: Many customers tend to increase their level of indebtedness and do not...

NICK XENOPHON: It's a debt trap, basically.

I don't know about debt trap but I've found 0% BTs useful and a key benefit of going to particular cards, if you know what you're doing (i.e. not use the cards for purchases). I'd be very upset if this was something that was removed from the market.

 

[Isochronous]

There is already too much regulation in this country. Leave our BTs alone!

 

[OzEire]

It was reported in today's AFR. I read it on my flight this morning.

The banks want to self regulate, not have a nanny state impose laws, so they will throw out these olive branches (canning 0% BTs for eg).

Another bank said that 0% BT helps debt laden individuals consolidate and reduce debt without adding further interest, fair point I think.

 

[Dr Ralph]

.

The banks want to self regulate, not have a nanny state impose laws, so they will throw out these olive branches (canning 0% BTs for eg).

Likely. And of course there are numerous situations where self regulation has worked so well in other industries.

 

[Daver6]

I heard about this and thought to myself the reason they give are BS. The real reason they want to can 0% BTs is because it costs them money. It has to be a reason some people churn from credit card A to credit card B, in order to save money on the interest expense. If they abolish 0% BT the banks get to keep charging much higher rates on the outstanding debt.

Sneaky banks

 

[exceladdict]

I heard about this and thought to myself the reason they give are BS. The real reason they want to can 0% BTs is because it costs them money. It has to be a reason some people churn from credit card A to credit card B, in order to save money on the interest expense. If they abolish 0% BT the banks get to keep charging much higher rates on the outstanding debt.

Sneaky banks

Good point but so do 50k sign on bonuses, I see them as customer acquisition costs.

 

[nickfromeastryde]

I actually agree with him even though I have often used the BT option myself and always make sure I pay off in full by the due date. However a number of my friends have got themselves in trouble and end up with double the debt and these are people that should know better, many even work in the banking industry on pretty high incomes

I hate to think how many "battlers" out there also get caught up and just have no ability to ever repay the debt. It is concerning to me when I read about financial planners recommending this to people in trouble (even Paul Clitheroe in his Money magazine has promoted it) when you just know the vast majority of people just aren't disciplined enough to use it properly

The fact that so many banks promote it shows what a trap it really is

 

[Pushka]

Usually when Institutions say something is good (or in this case, bad) for the customers, I've found the opposite applies.

 

[Alanslegal]

"Many do not pay off the debt before the end of the offer period"

And I am sure the banks love it at that stage ... kicking in back to 20% interest rate.

Must be the savvy ones who pay the BT in full are pissing off Mr Comyn

 

[Awesom Andy]

Come to think of it, I'm paying off credit cards with other credit cards for no fees/interest where I'm currently based in...

 

[mooingchicken]

. The real reason they want to can 0% BTs is because it costs them money.

Comm bank don't offer any BT cards, so they aren't making or losing out on money that way.

BT is good for some people, I know a lot of others who wouldn't understand these cards do a BT and then keep using the card, not paying off the purchases.

The best step would be that if people use BT then use the card to buy things is that it automatically pays off the new purchases first (ie the part attracting the higher interest)

 

[trippin_the_rift]

Comm bank don't offer any BT cards, so they aren't making or losing out on money that way.

BT is good for some people, I know a lot of others who wouldn't understand these cards do a BT and then keep using the card, not paying off the purchases.

The best step would be that if people use BT then use the card to buy things is that it automatically pays off the new purchases first (ie the part attracting the higher interest)

1) The best step would be if consumers read the T&C before they agreed to them in the first place.
2) Combank is likely losing customers who would otherwise be on 20% interest to the likes of citibank who offer good BT deals.
3) Citi has a 1.5% establishment fee on some BT products - not all are 0%
4) EVERYONE wins from 0% BT transfers if you know how to use them properly, and if not; see point (1).

I have a prediction that banks will start offering points to customers who leave a balance on the card and do BT deals with contractual periods (ie: 0% for 12 months but BT payments from other banks will be rejected), forcing you to repay it yourself rather than continually shop around the balance.

Prediction #2: There will be a day where a bank will pay you to BT funds when you agree to xx_ and YYY. It's in the bank/country/worlds interest for everyone to always be in perpetual debt, so get spending folks!

 

[Deleted member]

So banks are not making a profit on CC's ?

 

[SeatBackForward]

I've never understood balance transfers, but they again I've never paid a cent of interest on any credit cards.

 

[MEL_Traveller]

I've never understood balance transfers, but they again I've never paid a cent of interest on any credit cards.

I too pay off my CC on the due date, avoiding interest... but I used a balance transfer a few years ago... I'd bought several shiploads of USDM miles... my account, for each of the parents, and for sister. So all up about USD6000++ (but the aud was close or above parity back then).

I was also getting a pretty high interest rate through an on-line saving bank.. 6% or something.

Got the offer for a BT on a dormant card I never use... simply parked the $6000 balance from 28 Degrees in BT card for 18 months and continued to earn 6% in the savings bank. I pocketed $500 for nothing. Win-win.

You have to be careful how the bank structures the BT. I used a dormant CC account... but had that account been one I use regularly, the BT effectively removed the interest free period on any new purchases (because there was an unpaid balance each month)! So that wouldn't have given me any saving at all.

BTW - the bank I did the BT with never offered me another one! So I guess they didn't like my approach!

 

[Pushka]

I used a BT this year but didnt use that card for purchases. They got me though - card renewal fee.

 

[knasty]

I've got 60k across 3 0% deals at the moment. Very happy to be funding my mortgage at 0% instead of 3.7%. Whenever I have been interested in an offer I immediately request a credit limit increase to maxx it out then confirm the BT.

 

[Dr Ralph]

I've got 60k across 3 0% deals at the moment. Very happy to be funding my mortgage at 0% instead of 3.7%. Whenever I have been interested in an offer I immediately request a credit limit increase to maxx it out then confirm the BT.

I assume with this approach you don't churn and chase start up bonuses, which would be worth more than the savings on your mortgage.

 

[exceladdict]

I've got 60k across 3 0% deals at the moment. Very happy to be funding my mortgage at 0% instead of 3.7%. Whenever I have been interested in an offer I immediately request a credit limit increase to maxx it out then confirm the BT.

I assume with this approach you don't churn and chase start up bonuses, which would be worth more than the savings on your mortgage.

Depends on your interest rate. If you assume 3 cards of 20k limit, and 50k lost sign up points per card, and a 4.5% interest rate on the mortgage which is probably average, that's $2700 saved (or 1.8 cents per point if you'd prefer 150k points).

Plus cash flow benefits.

My conclusion is as long as you're comfortable using debt as a tool and understand the risks, it's a good product to have available

 

[russ]

Comm bank don't offer any BT cards, so they aren't making or losing out on money that way.

Commbank's competitors are offering BT's, so Commbank is losing customers