Even when you have plenty of assets, boosting your card limit can be a challenge. Picture / 123RF
Your correspondent [last week] trying to increase their credit card limit and being declined by ANZ was the exact experience I have just had.
I am 67 years old and ANZ has been my bank of choice all my working life. I have a mortgage-free home and a rental in Auckland plus KiwiSaver, which I have been in from the outset, also with ANZ. I am currently earning a very good salary and wanted to increase my credit card limit for a one-off purchase.
My mistake was declaring that I had resigned from my employment, so I was declined, as only superannuation and rental income would be reviewed for an ability to pay.
Being very familiar with the Responsible Lending Code, I declared my changing financial circumstances, believing it didn't matter due to my assets being sufficient for the bank to have security in their lending.
I must say I was shocked and annoyed. The intention of the CCCFA (Credit Contracts and Consumer Finance Act) has been taken to extreme levels by ANZ.
In ANZ's favour, I have had no real issues in all the years I have banked with them. However, this kind of decision will have customers considering options.
Says an ANZ spokeswoman: "We don't comment on individual cases." But, she adds, "We do our best to accommodate customers who request an increase of their credit card limit, however we do have criteria that need to be met."
For other perspectives, read on.
Thanks for publishing our issue about extending our credit card limit, and the response from ANZ.
Last Saturday, we spent a frustrating hour arguing our case with ANZ staff over the phone without success, and do not want to go through this agony again.
Do you have someone at ANZ that we could contact? Greatly appreciate your kind advice.
I've passed on to you and the previous correspondent details on who to contact at the bank.
However, readers have also made other suggestions for you. See the next two letters.
Referring to "Not enough credit" in last Saturday's column, I don't get it.
We are in about the same situation. When we go on overseas holidays we just transfer money from our savings (in advance) to our credit card account, so we don't exceed our credit limit. We may miss out on some interest, but as we transfer the excess back again after the trip, we don't miss much.
Our bank, TSB, has a savings account with slightly lower interest rate than its term deposits, so we keep some immediate money there. Maybe the writer had some problem with breaking term deposits. But it all has to be paid back (into the credit card account) anyhow after the trip to avoid interest charges, doesn't it? What is it we are doing wrong?
Nothing. And the interest you missed, even on a large amount of money, wouldn't be much over a short period.
I suppose, though, your strategy is slightly less convenient than simply having a larger credit limit.
I've just read "Not enough Credit" and wanted to say that this time I strongly disagree with your comments. My suggestion to the people concerned is in stages:
• Do NOT go back to ANZ and "talk".
• Apply to every other bank for the credit card package you would like. Then choose the one you prefer.
• Closely watch the expiration of your ANZ term deposits and remove same to a competitor bank.
• Arrange to move any ANZ working accounts to a competitor bank, taking care to ensure direct credits, direct debits or other payment processes you have are correctly moved. And for a short time keep both accounts open.
• Optional, but if you prefer, tell ANZ each time you close one of your accounts.
Elsewhere in your column on the same day a reader wrote, "brand loyalty is for suckers", which in today's banking world is just so true.
By way of background on me, I have some 30 years in banking and financial services locally and in Australia.
I agree with your suggestions, especially after reading of the other reader's similar experience, and that last week's correspondent didn't get far by ringing ANZ.
Another reader also suggested switching banks. Excerpts from his letter:
"My thoughts are this couple are very nice people. I say to them, "Harden up." I'm sure with those figures any other NZ bank managers would be queuing up for that couple's business!
"I would suggest banking with Taranaki Savings Bank or Kiwibank to support the two NZ-owned banks ...
"I cannot understand ANZ's policy! A major slip-up."
Could the explanation be that ANZ is not keen to have the couple's credit card business because they always pay their full balance each month, so the bank can't charge interest? Too cynical?
On switching banks, I did it years ago and, as you point out, I had to move automatic bill payments, which is a bit of a hassle. And yes, it's best to leave the old and new accounts both open until the dust settles. But enough is enough.
My comment relates to remaining with one's KiwiSaver fund on retirement.
I "retired" at the end of 2015, and elected to continue with KiwiSaver while I work part-time, still investing at 8 per cent of my income, for another 12 months I'd guess.
I noticed only recently that my KiwiSaver account is still taxed at the full rate of 28 per cent. This is not something I had picked up on within the many discussions on KiwiSaver, and I had assumed that modern money systems would adjust the tax take automatically.
I checked with IRD to learn that the previous two years of salary set the tax rate, rather than what one earns currently.
So I have another year to go before the tax rate drops to the normal level for my earnings. Plus, I must contact my provider to change the rate, (my responsibility, which is fine now I know).
Mary, when I add in the fact that my KiwiSaver provider (a solid, large fund) charges a higher than average fee (and it is a conservative fund), plus tax is still at the max, I'm considering taking the money out and placing it with a non-KiwiSaver fund.
Some of your older readers may not be aware of these details, or maybe it's just me!
I'm sure it's not just you. Nor is it just retirees. I suspect that for many thousands of KiwiSaver members of all ages, tax is taking too big a bite out of the apple.
They would include people who didn't get the tax rate right in the first place, as well as those whose income has dropped for more than a short period for any reason - perhaps taking time off work for health reasons, to look after children, or to set up a new business.
Paying too much tax could make a big difference to the compounding growth in your KiwiSaver account over the years. So thanks for raising the issue. And there's some good news for you.
But first, let's look at the basics. Pretty much all KiwiSaver funds are the rather clumsily named portfolio investment entities, or PIEs. Income from PIES is taxed at somewhat lower rates than other income.
When you sign up for KiwiSaver, your provider should help you work out which tax rate it should apply to the returns in your account. That rate is called - brace yourself for more initials - a prescribed investor rate or PIR. If you don't give your provider this information, you will automatically be taxed at the top PIE rate, which is 28 per cent.
Inland Revenue picks up the story from here. "If the investor wants to change the PIR at some point, the new rate is to be based on the past two years' income (as your reader states)," says a spokesman.
But here's the good bit. "If those two years have differing incomes, the investor may choose the lower of the income years as the basis for changing to a new PIR.
"The reason for this is to ensure that the new PIR is based on reliable, verifiable information and not subject to change during the year.
"That means for the first year of your reader's 'retirement', their PIR would remain at the rate used while they were working full-time. However, a lower PIR may be used after their first year of semi-retirement if that year's income is lower."
After that first year:
• "If the taxable income in the first year of 'retirement' was $14,000 or less, and their combined taxable income and the PIE income was $48,000 or less, then the PIR for the following year would be 10.5 per cent.
• "For $14,001 to $48K in taxable income and combined income of $70,000 or less, the PIR would be 17.5 per cent.
• "Otherwise the PIR would remain at 28 per cent."
Don't forget that you have to tell your provider you want the rate to be changed.
Another minor point: You wrote about the previous two years of salary. You should count not just salary, but all taxable income.
On your comment about your current fund's fee, I suggest you use the KiwiSaver Fund Finder on www.sorted.org.nz to find a suitable fund with a lower fee.
For other readers: you can work out your correct PIR rate at www.tinyurl.com/yourPIR, and then ask your provider if that's the rate currently being used. If you have difficulties with this, your provider should help you out.
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