Banks Prepare For Consumers To Skip Out On Credit Card Payments
Credit card payments are often among the first loans people stop paying during economic crises, as they are usually unsecured. Lenders are preparing for this to be the case during the COVID-19 crisis.
Indeed, the NAB’s Financial Anxiety Index rose for the third straight quarter in Q1 2020, with 4 in 10 Australians saying they experienced some form of financial stress or hardship over the past three months. Banks are therefore readying to face more difficult times alongside their customers, as consumer spending is an important source of revenue.
Westpac has announced that a three-month pause of repayments and interest for customers that have been impacted by the COVID-19 pandemic, and will not require these customers to make any repayments during this time.
Under Westpac’s support package, consumers will not be charged or accrue any interest on new card purchases or cash advances (though cash advance fees still apply), nor will they accrue interest on existing amounts owing.
To be eligible, Westpac credit card holders will have to be have been up to date with minimum repayments at some point during the last 90 days and have had the credit card on the 1st of January. You can view the full terms requirements of Westpac’s credit card relief package here.
Most of Australia’s major banks are still charging interest but have lowered rates. For example, as of today NAB is reducing the minimum monthly payment to 0.5% of the closing balance until at least 24th July. NAB is also reducing the standard purchase interest rate on personal NAB Low Rate Classic Cards to 12.99%.
ANZ is not yet offering lower rates. Instead, the bank is encouraging customers experiencing financial hardship to contact them to transfer to a product with lower interest rates or lower credit limits.
CommBank is refunding late payment fees and/or interest for March 2020 for eligible credit card holders, but has not stated whether this will be extended to April.
ING is allowing for credit card payments to be paused for three to six months, but interest and fees will still be accrued during this period.
Given the tough times that lay ahead, we may see the main banks introduce more support measures. Today, Roy Morgan reported that a staggering 10.5 million Australian workers have had their employment situation changed by the COVID-19 pandemic, with 2.7 million stood down.