Credit card customers warned about sweeteners
Credit card customers are being warned of the potential pitfalls of accepting "balance transfer" offers as a war for new business hots up between banks.
Last Thursday Air New Zealand announced it had replaced BNZ with Westpac as its new airpoints rewards partner, effective from May.
READ MORE: Westpac bumps BNZ as points partner
Westpac estimates the end of the 16-year relationship will displace as many as 100,000 of BNZ's GlobalPlus customers, and has made no secret of its plans to poach them.
Both banks have launched major advertising campaigns in an attempt to win over any customers unsettled by the change.
Existing airpoints partners Kiwibank and ANZ are also running their own ad campaigns.
Kiwibank spokesman Bruce Thompson said enquiries had increased significantly. Whenever there was "turmoil" in the market, people would weigh up their options, he said.
"Customers will make their own call, they will look around. Kiwibank's there, and yes we're taking calls."
ANZ could not immediately confirm its own intentions.
Among the various sweeteners and lures being dangled, all four banks are offering to transfer card balances from their rivals.
The deals, which offering zero or low interest on the balance for a set period, have become highly competitive in recent years.
However, Banking Ombudsman Deborah Battell said her office was seeing an increase in complaints about the offers, prompting her to publish a guidance note.
"The trouble is some people aren't necessarily across the conditions that go with the deal and find themselves caught out when they get their statement," she said.
"Transferring a credit card debt may help save on interest, as long as you're fully across how it works."
In one case the Ombudsman dealt with, "Mr C" accepted a balance transfer offer and made a number of purchases on his new card.
He was surprised when he saw the interest charged was much higher than the low balance transfer rate, not realising any new spending attracted normal interest rates.
The Ombudsman found the full details were in the bank's terms and conditions, which Mr C had not read.
Battell warned that new spending on the cards would not be paid off until the transferred balance was cleared.
She also said people should be aware that the low interest rate on offer usually only applied to a specific timeframe.
BNZ retail and marketing director Craig Herbison said the bank's new cashback rewards scheme would offer the same value as airpoints, and become more generous over time.
He hinted that "flying and travel alternatives" would be included, and said customers would be rewarded on the basis of their entire relationship with the bank.
The number of affected customers with GlobalPlus cards was commercially sensitive, Herbison said.
Westpac chief executive David McLean said the 10 year contract his bank had signed was a coup, and presented "a huge opportunity".