Warning over Warehouse credit plan
The Warehouse customers are poised to lurch $200 million further into debt with the launch of the retail chain's financial arm next year.
The Warehouse Group plans to lend $600m by 2020 by expanding its consumer finance arm, introducing new credit cards, hire purchase plans and insurance schemes.
Customers of New Zealand's biggest retailer already borrow $400m through two Westpac-run Mastercards and third-party life, travel and pet insurance.
Massey University banking expert David Tripe said such moves were part of retailers' response to internet shopping, and "they won't make any money unless people get into debt".
Robert Antonio, manager of Porirua Budget Service, said credit card debt already brought more than 100 clients to the service each year, and he advised people to steer clear of any new cards. "In the right hands, it's fine. In the wrong hands, it's not.
"[It's] just a very, very easy way of getting into trouble, getting into debt." Debts of $20,000 were not unusual for his clients, and many borrowed more to pay their other debts, he said. "It's adding debt to debt."
Prof Tripe said that, judging from The Warehouse's past credit cards, it might offer a lower interest rate but no interest-free period.
The Warehouse's $600m was about the same amount Farmers lent its customers, he said. The group was probably targeting a market dominated by GE Finance, which underwrote most retail credit and helped Countdown supermarket launch its credit card.
The Warehouse Group said only a small proportion of the profits from its existing cards were returned to the group, so it was bringing these products in-house.
Branded credit cards and other financial services would be offered at Warehouse-owned chains The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7 from 2015. The group has bought Diners Club New Zealand for $3m and would raise $115m in new capital from investors to support the venture.
"We have more than 1.4 million people per week through our stores," Warehouse chief executive Mark Powell said. "We have experience selling these products and we have now got the scale to do it ourselves."
Current holders of Warehouse, Diners Club or insurance cards would not notice any differences, and existing terms would remain the same for now, he said.
Each of the group's brands could sell credit services to suit their specific customer needs. Noel Leeming could offer a credit card or loans to finance big-ticket purchases such as televisions. A Torpedo7 card could offer travel insurance for its thrill-seeking customers, while a Warehouse "value" credit card could be linked to what customers buy in-store.
Credit cards were likely to be offered by Visa or Mastercard, while a Diners Club card would be the group's premium credit card option, Mr Powell said.
DEBT OR CREDIT?
The Dominion Post asked shoppers at The Warehouse in Porirua how many credit cards they held, whether they paid them in full each month, whether credit was too easily available, and whether they would sign up to a Warehouse card.
Jeff Tronc, 71, Pukerua Bay, retired.
Has one credit card, pays in full each month. "You get the impression they're too easy to get." Wouldn't dream of getting a Warehouse card. "One's enough."
Moni Pue, 43, Otaki, salesman.
Wife has one card, does not pay full amount. It was way too easy to get credit. Got into debt with The Warehouse years ago, so would not get another Warehouse card.
Lynne Allen, 62, Avalon, toy merchandiser.
Has two credit cards she hardly uses. Pays them in full. "If I don't have the money, I don't buy it." Would not get a Warehouse card.
Victoria Clapham, 25, Pauatahanui, veterinary student.
Has no credit cards. "If you've got half a brain you quickly realise it's a trap." Credit was not too easily available, she said.
New Zealand's credit card debt stands at $5.7 billion
The average interest rate is 17.9 per cent
Kiwis held 2.65 million credit cards in 2012, down from an all-time high of 2.74m in 2011
When records began in 1981, New Zealanders owed $95m on credit cards