Credit Card Churning May Get More Difficult.

[Mr_Orange]

Charge cards need to be paid off each month and hence aren't regarded as a credit instrument, so you are correct.

That makes perfect sense but it never occurred to me to think about it that way. In any case, I never included my Charge card in credit card applications as I couldn't think what to put in the credit limit box.

Out of interest, what happens if you don't pay a charge card off in full?

 

[AviationNZ]

Does anyone know if holding a corporate credit card (where the employer has responsibility for paying the bills, but the employee has responsibility for using within expense policy) impacts your personal credit report?

My manager said she opted to not take out a corp card as didn't want to impact her credit history, but I was always of the understanding (since you dont apply for a limit ion a corporate card) it is outside your personal credit history.

Corporate cards have zero effect on your personal credit history. They don't require any credit checks, serviceability checks, etc. The repayment is the sole responsibility of the company, not the individual. They're exactly the same as supplementary cards.

 

[theblank]

My manager said she opted to not take out a corp card as didn't want to impact her credit history, but I was always of the understanding (since you dont apply for a limit ion a corporate card) it is outside your personal credit history.

Your manager will be right, if she is the Owner or Director. Commercial debts are also recorded on a personal credit file, because the company/business debts are her debts too.

If she is not the owner, or director and just another employee like you, she is wrong.

 

[theblank]

That's the traditional interpretation from the banks but as far as the legislation goes the responsibility for responsible lending falls on the credit provider.

Thats exactly what I said/mean, and has always being, even before the UCCC.

In my view it is likely that an outcome of the Royal Commission will be a stronger stance from the regulators and the government in regards to validating the lenders repayment capacity

That is what is being enacted on Janaury the 1st, in respect of credit cards.

I'm not sure the its "too costly an adminstrative burden" argument used in the past will be regarded as acceptable. There is already some evidence of this being applied to bank practices which are in place mainly for ease of administration.

There is just no way to 'refinance' credit cards in a controlled manner, to ensure the cancelled credit card account remains cancelled, It will never be practical to work it. Unless the govt legislates that it has to be done it wont be. Its just that simple, and its very unlikely the govt would even try.

The lenders will continue to take the customers word (or written undertaking) that they will cancel their old cards. The problem with credit cards, is the customer can phone up, cancel it, and get a letter confirming. Then 2 weeks later, ring back and say they have changed their mind, and get it reinstated. (in fact the bank does not actually cancells it for that reason, to allow time for retention). Everyone knows this.

*A possible solution would be to require that all credit card cancellation requests in writing are irrevocable, and that the new provider must take this form and pass it back to the previous provider.

*Actually, could something like this even already be in place? I cancelled my westpac card recently,only had it 6 months. The guy didnt even ask me why I wanted to cancel it, he just did it. was all over in a couple of minutes. I was so disappointed they didnt ask, let alone offer me bait to stay.

 

[Renato1]

It likely wont be as bad as it seems, because the lenders still want to get your credit card business, they know that means you will be cancelling an existing card. Alll they have to do is comply with the legislation. If the assessor must include existing card limits + new card limit, hardly anyone would get a new credit card. Its no different to refinancing a PL or HL, the decision is made on the 'post loan' expenses.

The smart banks will provide a way for the applicant to declare the current credit card limits, and which ones they are 'refinancing', and those wont be included in the credit assessment. After that its still unlikely that the credit card provider will demand proof the previous limit is cancelled, that would be too costly an administrative overhead. Rather the onus will be on the cardholder to make good on the cancellation. If they dont and then run into debt problems, the cardholder wont be able to claim the credit card company was irresponsible in approving the limit.

But banks constantly refuse to be smart.

They always focus on income rather than on wealth.

If one's combined credit card limits add up to say $100,000, and one's income is $100,000 per annum and one has say $500,000 in the bank or allocated pension account - I doubt one will get another credit card with a $10,000 limit using their free cash methodology. Even though if all the credit cards were maxed out to their limits, one could just draw the cash down from savings and pay them off five times over easily.
Regards,
Renato

 

[Renato1]

Perhaps you can pre-load? I’d like to know the answer to that. But yes, it has too low a limit.

Good point - though pre-loading has some difficulties as I discovered when I used to do it on my 28 Degree card.

When one puts a preloaded credit card into some machines overseas to pay for a purchase, the positive balance triggers a 0 or 1 digit to be flicked on in the machine - and it declines the transaction, and I had to pull out another card to pay it and the 3% transaction fee. It happened several times to me in the past, and when I'd contact 28 Degrees to ask why they declined the transaction, they'd say that it wasn't them and that they had no record of the transaction being declined.

The other problem is that if one pre-loads a large amount into the card, just in case something goes wrong - say for a medical emergency - then when the trip is over, the emergency didn't happen, and the money has not all been used, there will be costs to get the money out. Though those costs can be avoided by only using that card until the positive balance is used up (but one will miss out on earning points using another card for thsoe purchases).
Regards,
Renato

 

[cambriamarsh]

Corporate cards have zero effect on your personal credit history. They don't require any credit checks, serviceability checks, etc. The repayment is the sole responsibility of the company, not the individual. They're exactly the same as supplementary cards.

The comment that corporate cards are the sole responsibility of the company may not be correct. In many cases the employee is liable if the employer doesn’t pay the bill, eg goes into liquidation. Read the term and conditions in full.

 

[pauly7]

The comment that corporate cards are the sole responsibility of the company may not be correct. In many cases the employee is liable if the employer doesn’t pay the bill, eg goes into liquidation. Read the term and conditions in full.

Yup and it’s not correct that corporate cards do not do a credit check. One of my employers card providers does do a credit check and thus a lot of people do not take the card out and elect to use their personal card and get ‘cash’ reimbursents. The company is not able to force people to either which creates a headache for finance! I don’t mind, I use my personal card and get points

 

[cambriamarsh]

Yup and it’s not correct that corporate cards do not do a credit check. One of my employers card providers does do a credit check and thus a lot of people do not take the card out and elect to use their personal card and get ‘cash’ reimbursents. The company is not able to force people to either which creates a headache for finance! I don’t mind, I use my personal card and get points

As a CFO I hate corporate credit cards for a number of reasons and will always encourage staff to use their own card and reclaim. If that causes a cashflow problem for them I’ll advance funds but they get topped up when the earlier advance is reconciled.

 

[AviationNZ]

The comment that corporate cards are the sole responsibility of the company may not be correct. In many cases the employee is liable if the employer doesn’t pay the bill, eg goes into liquidation. Read the term and conditions in full.

Yup and it’s not correct that corporate cards do not do a credit check. One of my employers card providers does do a credit check and thus a lot of people do not take the card out and elect to use their personal card and get ‘cash’ reimbursents. The company is not able to force people to either which creates a headache for finance! I don’t mind, I use my personal card and get points

Well, I learnt something new today!! Didn't realise some corporate cards require a personal credit check! I probably should've said that the two or three I've had don't require any credit checks and there isn't any liability with the employee. With my current employer, we're pushed to use our corporate card which means I miss out on points

 

[cambriamarsh]

Well, I learnt something new today!! Didn't realise some corporate cards require a personal credit check! I probably should've said that the two or three I've had don't require any credit checks and there isn't any liability with the employee. With my current employer, we're pushed to use our corporate card which means I miss out on points

Are you sure you're not liable if the employer falls over, have look at the Ts and Cs you would have agreed to at the time. I'm based in NZ and with the last few I looked at, the employee was the fall back. More than a couple got caught out by this after the Great NZ recession of the late 1980s and the clause was still there recently (but haven't heard of it being used recently FWIW).

 

[TomVexille]

Well, I learnt something new today!! Didn't realise some corporate cards require a personal credit check! I probably should've said that the two or three I've had don't require any credit checks and there isn't any liability with the employee. With my current employer, we're pushed to use our corporate card which means I miss out on points

I know that at least a couple of my colleagues have had a credit check from Amex for their card. We are allowed to accrue points on a company charge card but we have to pay the $79 rewards fee. I haven't bothered getting one yet. But that may change.

 

[burmans]

There is just no way to 'refinance' credit cards in a controlled manner, to ensure the cancelled credit card account remains cancelled, It will never be practical to work it. Unless the govt legislates that it has to be done it wont be. Its just that simple, and its very unlikely the govt would even try.

This is where I'd disagree, we already have account switching regulation (admittedly it doesn't work well), in my view the problem is in the execution side rather than the governments ability or willingness to legislate.

 

[rock86]

But banks constantly refuse to be smart.

They always focus on income rather than on wealth.

If one's combined credit card limits add up to say $100,000, and one's income is $100,000 per annum and one has say $500,000 in the bank or allocated pension account - I doubt one will get another credit card with a $10,000 limit using their free cash methodology. Even though if all the credit cards were maxed out to their limits, one could just draw the cash down from savings and pay them off five times over easily.
Regards,
Renato

Of course a financial institution focuses on income only when assessing a credit card, it is unsecured finance. You want them to focus on wealth also, go get a secured loan.

 

[andye]

Of course a financial institution focuses on income only when assessing a credit card, it is unsecured finance. You want them to focus on wealth also, go get a secured loan.

Maybe a secured line of credit would be closer to the desired instrument. No idea how easy they are to arrange (nor the size of fees) for a lowish-income asset-rich customer

 

[Renato1]

Of course a financial institution focuses on income only when assessing a credit card, it is unsecured finance. You want them to focus on wealth also, go get a secured loan.

It's the "Of course" part of your statement in relation to these minuscule amounts that I do not understand.

Suppose two people apply for a credit card with a $10,000 limit.

One is on $100,000 a year and has zero savings.
The other is on $50,000 a year and has $500,000 in liquid savings.

Which is most likely to have ever no problems repaying his card?
The banks say the first based on income alone, when plainly the second is the better credit risk by far.
Regards,
Renato

 

[rock86]

It's the "Of course" part of your statement in relation to these minuscule amounts that I do not understand.

Suppose two people apply for a credit card with a $10,000 limit.

One is on $100,000 a year and has zero savings.
The other is on $50,000 a year and has $500,000 in liquid savings.

Which is most likely to have ever no problems repaying his card?
The banks say the first based on income alone, when plainly the second is the better credit risk by far.
Regards,
Renato

It's 'of course' because of the type of credit that is issued.

You can have 10million in the bank but it makes little difference in a credit card assessment, as the financial institution has no security over that asset.

As I said, if you want your wealth to be included in an assessment, apply for secured finance.

 

[ragingsheep]

There is just no way to 'refinance' credit cards in a controlled manner, to ensure the cancelled credit card account remains cancelled, It will never be practical to work it. Unless the govt legislates that it has to be done it wont be. Its just that simple, and its very unlikely the govt would even try.

The lenders will continue to take the customers word (or written undertaking) that they will cancel their old cards. The problem with credit cards, is the customer can phone up, cancel it, and get a letter confirming. Then 2 weeks later, ring back and say they have changed their mind, and get it reinstated. (in fact the bank does not actually cancells it for that reason, to allow time for retention). Everyone knows this.

*A possible solution would be to require that all credit card cancellation requests in writing are irrevocable, and that the new provider must take this form and pass it back to the previous provider.

*Actually, could something like this even already be in place? I cancelled my westpac card recently,only had it 6 months. The guy didnt even ask me why I wanted to cancel it, he just did it. was all over in a couple of minutes. I was so disappointed they didnt ask, let alone offer me bait to stay.

Once comprehensive credit reporting comes completely into force, issuers will be able to see what accounts you still have open and will be able to base their information on that, rather than having to ask you. Which might be an issue since some issuers seem to be fairly slow in updating your credit information *cough* Citi *cough*.

Also, as part of new ASIC rules, issuers need to provide an online method of cancellation if you signed up online and can't offer any inducements for you to stay once you mention that you want to cancel your cards.

 

[andye]

...Also, as part of new ASIC rules, issuers need to provide an online method of cancellation if you signed up online and can't offer any inducements for you to stay once you mention that you want to cancel your cards.

Does that mean we have to be careful with what we say when fishing for a retention bonus?

 

[Mr_Orange]

Also, as part of new ASIC rules, issuers need to provide an online method of cancellation if you signed up online and can't offer any inducements for you to stay once you mention that you want to cancel your cards.

Interesting and explains why HSBC sent me an email spruiking the ability to close the account online.