YOUR GUIDE TO PRODUCT EXCELLENCE
Report No. 7 June 2008
IN THIS REPORT WE EXPLORE …
Cost of personal credit escalates
Balance transfer offers get creative
Beware the downside – transferring a balance not always wise
Minimum repayments may increase your debt
COST OF PERSONAL CREDIT ESCALATES
Despite no changes to the Official Cash Rate since the previous CANNEX credit card star ratings in November, the majority of credit cards have increased their interest rates by around 1% over the past six months. This is most likely due to the increased cost of borrowing for financial institutions due to the global credit crunch which has made easy money much harder to come by. If it costs the banks more to borrow from each other, as is now the case compared with before, then it will cost us more as banks pass on their increased costs.
BALANCE TRANSFER OFFERS GET CREATIVE
With so many of us nowadays revolving a credit card balance from month to month, it’s tempting to look at the various balance transfer offers on the market. You can get a 6-month balance transfer interest rate as low as 4.95% through BNZ, with an ongoing rate after the introductory period as low as 13.49% if you pick out – and get approved for! – the Lite Visa card.
Alternatively, if chopping and changing cards every six months isn’t for you, but your credit card debt is going through the roof due to high interest rates, you could consider a life-of-the-balance offer. Westpac and Wizard Home Loans both offer rates of just under 10% on balance transfers.
BEWARE THE DOWNSIDE
If you are struggling to pay off credit card debt, a short-term low-interest balance transfer offer sounds very tempting, However you must be realistic when looking at a credit card debt- reducing strategy. Card-hopping from one to another as soon as the balance transfer period expires and reverts to the higher rate of interest is not always wise. Each time you apply for a credit card, it will appear on your credit history. Lenders tend to interpret an active credit history as disloyal and somewhat of a risk. In this economic climate when lenders are having difficulty sourcing funds, you may even find yourself being refused credit so don’t take it as a given.
Many financial institutions are being forced to tighten credit conditions – either by raising rates above the cash rate increases, or by simply making their lending criteria much stricter than before.
The tightening credit conditions are likely to result in fewer successful credit applications over
the coming months and possibly longer. So if you’re a long-term balance revolver relying on
YOUR GUIDE TO PRODUCT EXCELLENCE
2
applying for another low interest rate offer six months down the line, be aware that even if these offers are still widely available in six months, your chances of getting approved for credit may not necessarily be as good as they are now, which could leave you stuck with a high revert rate on your current card. If this is a concern to you, then a life-of-the-balance offer may be the way forward for you. The most important question to ask yourself is how long it will take you to realistically pay off the outstanding balance. A truthful answer will determine which balance transfer offer will benefit you the most.
The potential trap you need to be aware of and thus avoid is actually using the new credit card before you have paid off the outstanding balance. The bottom line is, don’t do it. Any transactions carried out on the card will incur the full interest rate. The trouble is your monthly repayments will automatically go towards the lower rate balance transfer, leaving your purchase accruing the higher rate until you pay off your old balance in full. This could be disastrous over a long time period. If you can’t trust yourself not to use the credit card, use another credit card for purchases and keep the balance transfer card strictly to pay off debt.
The two charts below illustrate how your revolving balance reduces differently under three different types of typical balance transfer offers, assuming you make minimum repayments each month, and most importantly, don’t spend a cent on these cards. Both charts assume a typical minimum repayment requirement of 3% of your outstanding balance.
The charts show how the life-of-the-balance offer (represented by the dotted line) pays off your card much more effectively if you’re paying off the minimum each month with no intention of paying your balance off within the first six months.
Minimum repayments on 3 different card types - $1,000
- 200 400 600 800 1,000 1,200
1 7 13 19 25 31 37
Months
O ut st and in g ba la nc e ( $)
6% 6mths, 13.5% revert rate, $50 annual fee 6% 6mths, 21.5% revert rate, $50 annual fee 9.95% life of balance, $29 annual fee
Note also how the high interest rate after 6 months sees your debt reduction slow down
compared with the lower rates.
YOUR GUIDE TO PRODUCT EXCELLENCE
3
2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500
1 7 13 19 25 31 37
Months
Outstanding balance ($)
6% 6mths, 13.5% revert rate, $50 annual fee 6% 6mths, 21.5% revert rate, $50 annual fee 9.95% life of balance, $29 annual fee
MINIMUM REPAYMENTS MAY INCREASE YOUR DEBT
As interest rates have kept going up, so have your minimum repayments…..you would think.
CANNEX analysed the 69 cards on the market which were also around a year ago. It will come as no surprise to learn that almost all of these, with the exception of just one, have increased their rates during the past year. Of these, the vast majority have increased their rates by approximately 2%. This gives us a typical interest rate rise of 0.167% per month compared with a year ago.
In stark contrast, not a single credit card issuer has increased its minimum repayment requirements – indeed some have actually decreased the minimum portion of your debt you are required to repay.
What does this mean? On one hand it’s great – as consumers, we effectively get extra credit, as we’re borrowing more (through higher interest rates) but only have to pay back the same as before. However, the sting in the tail is waiting for those revolving a balance, ie not paying our cards off in full each month. For those who make minimum repayments only, it’s more likely, compared with a year ago, that making minimum repayments only will have an insignificant impact on your balance, as in many cases now, the combined cost of annual fees plus interest rate are closer to or even higher than the minimum repayments.
The chart below illustrates how, compared with a year ago, the average amount by which a
minimum repayment will reduce your balance has decreased significantly.
YOUR GUIDE TO PRODUCT EXCELLENCE
4
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$1,000 $3,000 $5,000
Outstanding Balance
By how much does the average minimum repayment reduce your balance?
May07 May08
It is well worth noting that the number of cards on which your balance will actually increase if you do nothing more than follow the minimum repayment requirements, has increased slightly compared with a year ago, and will continue to do so if interest rates rise further while minimum repayment requirements remain unchanged.
If we take as an example an outstanding balance of $3,000 on a typical card which a year ago was charging a rate of 19.95%, annual fee of $50 with a minimum monthly repayment of 4%, and now has a rate of 21.95% and minimum repayment of 3%, the balance will take around 16 years to pay off compared with 9 years previously.
For this CANNEX credit card star ratings report, we have analysed 79 credit cards from 11 institutions to award five star products in each of the four spending profiles – habitual spender, everyday spender, impulse spender and big spender. For each profile there are some excellent product choices that combine value-for money, factoring in interest rates, fees and features.
Our methodology used to rate all credit cards is explained at the very end of the results
document.
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Habitual Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"superior value"
ANZ Bank NZ Low Rate Mastercard 14.90 55 58.00 N/A 500 No max ✘ ASB Bank NZ Low Interest MasterCard 12.50 55 60.00 N/A 1000 No max ✘ Bankdirect NZ Visa Classic Low Int 11.95 55 60.00 N/A 1000 No max ✘ BNZ NZ Lite VISA Card 13.49 55 60.00 N/A 500 12000 ✘ Kiwibank NZ MasterCard Zero 15.90 55 0.00 N/A 500 No max ✘ Kiwibank NZ Low Rate MasterCard 13.30 55 50.00 N/A 500 No max ✘ National Bank of NZ Low Interest Visa Card 14.90 55 78.00 N/A 1000 No max ✘ Westpac NZ Low Interest MasterCard 13.90 55 65.00 N/A 500 No max ✘
"exceptional value"
Bankdirect NZ Visa Classic Standard 19.95 55 20.00 N/A 1000 No max ✘ National Bank of NZ Freestyle MasterCard 18.20 0 0.00 N/A 500 No max ✘ TSB Bank NZ Visa Card 18.50 55 18.00 N/A 500 No max ✘
"strong value"
ASB Bank NZ Visa 20.95 55 24.00 N/A 0 No max ✔
BNZ NZ MCD Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ VISA Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ VISA Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ MCD Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ National Bank of NZ VISA Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ MCD Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ VISA Classic 22.20 55 20.00 N/A 500 No max ✘ Westpac NZ The Warehouse MasterCar 19.99 55 25.00 N/A 500 No max ✔ Westpac NZ Visa 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ MasterCard 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ Super 14's Rugby Visa Cd 21.85 55 28.00 N/A 500 100000 ✔
"rising star"
Westpac NZ Warehouse Rewards Card 21.49 55 34.00 N/A 500 No max ✔ Westpac NZ WarehouseLowInterest M/C 12.90 55 65.00 N/A 500 No max ✘
"average value"
ANZ Bank NZ Qantas ANZ Visa Classic 21.95 44 65.00 N/A 500 No max ✔ ANZ Bank NZ Visa 21.95 55 25.00 N/A 500 No max ✘ ANZ Bank NZ MasterCard 21.95 55 25.00 N/A 500 No max ✘ ASB Bank NZ MasterCard 20.95 55 24.00 N/A 0 No max ✔
Report Date: June, 2008
your guide to product excellence
Page 1 of 2 HABITUAL SPENDER PROFILE SUMMARY:
credit card star ratings
Text218:
Section 1: Profile Summary Report
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Habitual Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"average value"
BNZ NZ MCD Standard GlobalPlus 21.95 44 45.00 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ VISA Standard GlobalPlus 21.95 44 55.00 N/A 500 12000 ✔ Wizard Home Loans Wizard NZ Fast Card-AMEX 20.49 55 35.00 5000 1000 12000 ✔
"satisfactory value"
American Express NZ Blue Credit Card 21.95 55 35.00 N/A 1500 12000 ✔ American Express NZ AA Credit Card 20.45 55 35.00 N/A 1000 No max ✔
BNZ NZ AMEX Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ All Blacks MasterCard 21.95 55 35.00 N/A 500 20000 ✔ BNZ NZ AMEX Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ BNZ NZ AMEX Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔
Report Date: June, 2008
your guide to product excellence
Page 2 of 2 HABITUAL SPENDER PROFILE SUMMARY:
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Everyday Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"superior value"
ANZ Bank NZ Qantas ANZ Visa Platinum 21.95 44 105.00 N/A 10000 No max ✔
BNZ NZ Visa Platinum 16.95 55 175.00 60000 10000 250000 ✔
BNZ NZ Ltd Edit VISA Platinum 12.95 55 175.00 60000 25000 500000 ✔
Kiwibank NZ MasterCard Zero 15.90 55 0.00 N/A 500 No max ✘ Westpac NZ Titanium MasterCard 17.90 55 240.00 30000 15000 No max ✔ Westpac NZ Visa Gold 21.90 55 70.00 N/A 7500 No max ✔ Westpac NZ Gold MasterCard 21.90 55 70.00 N/A 5000 No max ✔ Wizard Home Loans Wizard NZ Fast Card-AMEX 20.49 55 35.00 5000 1000 12000 ✔
"exceptional value"
American Express NZ Blue Credit Card 21.95 55 35.00 N/A 1500 12000 ✔ BNZ NZ MCD Gold Rewards Plus 21.95 44 80.00 N/A 6000 50000 ✔ BNZ NZ MCD Gold Everyday 21.95 55 80.00 N/A 6000 50000 ✔
BNZ NZ MCD Gold Fee Saver 21.95 55 80.00 20000 6000 50000 ✔
BNZ NZ VISA Gold Fee Saver 21.95 55 80.00 20000 7500 50000 ✔
BNZ NZ VISA Gold Rewards Plus 21.95 44 80.00 N/A 7500 50000 ✔ BNZ NZ VISA Gold Everyday 21.95 55 80.00 N/A 7500 50000 ✔ National Bank of NZ MCD Gold Thoroughbred 22.20 55 95.00 N/A 7500 No max ✔ National Bank of NZ Freestyle MasterCard 18.20 0 0.00 N/A 500 No max ✘ National Bank of NZ VISA Gold Thoroughbred 22.20 55 95.00 N/A 7500 No max ✔
"strong value"
Bankdirect NZ Visa Classic Low Int 11.95 55 60.00 N/A 1000 No max ✘
BNZ NZ VISA Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ VISA Gold Rewards Plus55 21.95 55 95.00 N/A 7500 50000 ✔ BNZ NZ MCD Gold Rewards Plus 55 21.95 55 95.00 N/A 6000 50000 ✔ BNZ NZ MCD Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ VISA Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔
BNZ NZ MCD Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ MCD Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ Kiwibank NZ MasterCard Gold 16.90 55 80.00 N/A 6500 No max ✘ Westpac NZ MasterCard 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ The Warehouse MasterCar 19.99 55 25.00 N/A 500 No max ✔ Westpac NZ Visa 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ Super 14's Rugby Visa Cd 21.85 55 28.00 N/A 500 100000 ✔
"rising star"
Westpac NZ Warehouse Rewards Card 21.49 55 34.00 N/A 500 No max ✔
Report Date: June, 2008
your guide to product excellence
Page 1 of 2 EVERYDAY SPENDER PROFILE SUMMARY:
credit card star ratings
Text218:
Section 1: Profile Summary Report
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Everyday Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"average value"
American Express NZ Platinum MemberRews Car 17.95 55 325.00 N/A 5000 100000 ✔ American Express NZ AA Credit Card 20.45 55 35.00 N/A 1000 No max ✔
BNZ NZ AMEX Gold Fee Saver 21.95 55 80.00 20000 4000 50000 ✔
BNZ NZ Lite VISA Card 13.49 55 60.00 N/A 500 12000 ✘ BNZ NZ MCD Standard GlobalPlus 21.95 44 45.00 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ Kiwibank NZ Low Rate MasterCard 13.30 55 50.00 N/A 500 No max ✘ National Bank of NZ VISA Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ MCD Thoroughbred 22.20 55 35.00 N/A 500 No max ✔
"satisfactory value"
American Express NZ Gold Credit Card 21.45 55 90.00 N/A 5000 50000 ✔ ANZ Bank NZ Low Rate Mastercard 14.90 55 58.00 N/A 500 No max ✘ ANZ Bank NZ MasterCard Gold 21.95 55 80.00 N/A 7500 No max ✘ ANZ Bank NZ Qantas ANZ Visa Classic 21.95 44 65.00 N/A 500 No max ✔ ASB Bank NZ MasterCard 20.95 55 24.00 N/A 0 No max ✔ ASB Bank NZ Visa 20.95 55 24.00 N/A 0 No max ✔ ASB Bank NZ Low Interest MasterCard 12.50 55 60.00 N/A 1000 No max ✘ ASB Bank NZ Visa Gold 20.95 55 80.00 N/A 5000 No max ✔ Bankdirect NZ Visa Gold 19.95 55 50.00 N/A 7500 No max ✘ Bankdirect NZ Visa Classic Standard 19.95 55 20.00 N/A 1000 No max ✘ BNZ NZ AMEX Gold Everyday 21.95 55 80.00 N/A 4000 50000 ✔ BNZ NZ VISA Standard GlobalPlus 21.95 44 55.00 N/A 500 12000 ✔ BNZ NZ AMEX Gold Rewards Plus 21.95 44 80.00 N/A 4000 50000 ✔ BNZ NZ All Blacks MasterCard 21.95 55 35.00 N/A 500 20000 ✔ BNZ NZ AMEX Gold Rewards Plus5 21.95 55 95.00 N/A 4000 50000 ✔ BNZ NZ VISA Gold GlobalPlus 21.95 44 105.00 N/A 7500 50000 ✔ BNZ NZ MCD Gold GlobalPlus 21.95 44 105.00 N/A 6000 50000 ✔ National Bank of NZ VISA Gold 22.20 55 75.00 N/A 7500 No max ✘ TSB Bank NZ Visa Card 18.50 55 18.00 N/A 500 No max ✘ TSB Bank NZ American Express Gold Cd 20.45 55 90.00 N/A 5000 50000 ✔ Westpac NZ Low Interest MasterCard 13.90 55 65.00 N/A 500 No max ✘
Report Date: June, 2008
your guide to product excellence
Page 2 of 2 EVERYDAY SPENDER PROFILE SUMMARY:
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Impulse Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"superior value"
ASB Bank NZ Low Interest MasterCard 12.50 55 60.00 N/A 1000 No max ✘ Bankdirect NZ Visa Classic Low Int 11.95 55 60.00 N/A 1000 No max ✘ BNZ NZ Lite VISA Card 13.49 55 60.00 N/A 500 12000 ✘ Kiwibank NZ MasterCard Zero 15.90 55 0.00 N/A 500 No max ✘ Kiwibank NZ Low Rate MasterCard 13.30 55 50.00 N/A 500 No max ✘ Westpac NZ Low Interest MasterCard 13.90 55 65.00 N/A 500 No max ✘
"exceptional value"
ANZ Bank NZ Low Rate Mastercard 14.90 55 58.00 N/A 500 No max ✘ Bankdirect NZ Visa Classic Standard 19.95 55 20.00 N/A 1000 No max ✘ National Bank of NZ Freestyle MasterCard 18.20 0 0.00 N/A 500 No max ✘ National Bank of NZ Low Interest Visa Card 14.90 55 78.00 N/A 1000 No max ✘ TSB Bank NZ Visa Card 18.50 55 18.00 N/A 500 No max ✘
"strong value"
BNZ NZ VISA Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ BNZ NZ MCD Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ Westpac NZ Visa 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ MasterCard 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ Super 14's Rugby Visa Cd 21.85 55 28.00 N/A 500 100000 ✔ Westpac NZ The Warehouse MasterCar 19.99 55 25.00 N/A 500 No max ✔
"rising star"
Westpac NZ WarehouseLowInterest M/C 12.90 55 65.00 N/A 500 No max ✘
"average value"
ASB Bank NZ Visa 20.95 55 24.00 N/A 0 No max ✔ BNZ NZ MCD Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔
BNZ NZ VISA Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ MCD Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ MCD Standard GlobalPlus 21.95 44 45.00 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ VISA Standard GlobalPlus 21.95 44 55.00 N/A 500 12000 ✔ National Bank of NZ VISA Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ MCD Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ VISA Classic 22.20 55 20.00 N/A 500 No max ✘
"satisfactory value"
Report Date: June, 2008
your guide to product excellence
Page 1 of 2 IMPULSE SPENDER PROFILE SUMMARY:
credit card star ratings
Text218:
Section 1: Profile Summary Report
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Impulse Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"satisfactory value"
American Express NZ Blue Credit Card 21.95 55 35.00 N/A 1500 12000 ✔ American Express NZ AA Credit Card 20.45 55 35.00 N/A 1000 No max ✔ ANZ Bank NZ Qantas ANZ Visa Classic 21.95 44 65.00 N/A 500 No max ✔ ANZ Bank NZ MasterCard 21.95 55 25.00 N/A 500 No max ✘ ANZ Bank NZ Visa 21.95 55 25.00 N/A 500 No max ✘ ASB Bank NZ MasterCard 20.95 55 24.00 N/A 0 No max ✔ BNZ NZ All Blacks MasterCard 21.95 55 35.00 N/A 500 20000 ✔ Wizard Home Loans Wizard NZ Fast Card-AMEX 20.49 55 35.00 5000 1000 12000 ✔
Report Date: June, 2008
your guide to product excellence
Page 2 of 2 IMPULSE SPENDER PROFILE SUMMARY:
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Big Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"superior value"
ANZ Bank NZ Qantas ANZ Visa Platinum 21.95 44 105.00 N/A 10000 No max ✔
BNZ NZ Ltd Edit VISA Platinum 12.95 55 175.00 60000 25000 500000 ✔
BNZ NZ Visa Platinum 16.95 55 175.00 60000 10000 250000 ✔
Westpac NZ Gold MasterCard 21.90 55 70.00 N/A 5000 No max ✔ Westpac NZ Visa Gold 21.90 55 70.00 N/A 7500 No max ✔ Westpac NZ Titanium MasterCard 17.90 55 240.00 30000 15000 No max ✔
"exceptional value"
American Express NZ Blue Credit Card 21.95 55 35.00 N/A 1500 12000 ✔ American Express NZ Platinum MemberRews Car 17.95 55 325.00 N/A 5000 100000 ✔ BNZ NZ MCD Gold Rewards Plus 55 21.95 55 95.00 N/A 6000 50000 ✔ BNZ NZ VISA Gold Rewards Plus55 21.95 55 95.00 N/A 7500 50000 ✔ BNZ NZ VISA Gold Everyday 21.95 55 80.00 N/A 7500 50000 ✔ BNZ NZ MCD Gold Rewards Plus 21.95 44 80.00 N/A 6000 50000 ✔ BNZ NZ MCD Gold Everyday 21.95 55 80.00 N/A 6000 50000 ✔ BNZ NZ VISA Gold Rewards Plus 21.95 44 80.00 N/A 7500 50000 ✔ National Bank of NZ VISA Gold Thoroughbred 22.20 55 95.00 N/A 7500 No max ✔ National Bank of NZ MCD Gold Thoroughbred 22.20 55 95.00 N/A 7500 No max ✔ Wizard Home Loans Wizard NZ Fast Card-AMEX 20.49 55 35.00 5000 1000 12000 ✔
"strong value"
American Express NZ Gold Credit Card 21.45 55 90.00 N/A 5000 50000 ✔ BNZ NZ AMEX Gold Rewards Plus 21.95 44 80.00 N/A 4000 50000 ✔
BNZ NZ VISA Gold Fee Saver 21.95 55 80.00 20000 7500 50000 ✔
BNZ NZ VISA Gold GlobalPlus 21.95 44 105.00 N/A 7500 50000 ✔ BNZ NZ MCD Gold GlobalPlus 21.95 44 105.00 N/A 6000 50000 ✔
BNZ NZ MCD Gold Fee Saver 21.95 55 80.00 20000 6000 50000 ✔
BNZ NZ AMEX Gold Everyday 21.95 55 80.00 N/A 4000 50000 ✔ Kiwibank NZ MasterCard Gold 16.90 55 80.00 N/A 6500 No max ✘ TSB Bank NZ American Express Gold Cd 20.45 55 90.00 N/A 5000 50000 ✔
"rising star"
HSBC NZ AMEX Platinum CreditCard 17.95 55 325.00 N/A 5000 100000 ✔ Westpac NZ Warehouse Rewards Card 21.49 55 34.00 N/A 500 No max ✔
"average value"
American Express NZ AA Credit Card 20.45 55 35.00 N/A 1000 No max ✔ ANZ Bank NZ Qantas ANZ Visa Classic 21.95 44 65.00 N/A 500 No max ✔ Bankdirect NZ Visa Classic Low Int 11.95 55 60.00 N/A 1000 No max ✘
Report Date: June, 2008
your guide to product excellence
Page 1 of 2 BIG SPENDER PROFILE SUMMARY:
credit card star ratings
Text218:
Section 1: Profile Summary Report
Published Rate (%)
Product
Rewards ProgramAvailable Max
Annual Fee ($) Free
Days
Big Spender
Annualised Fee
Credit Limit ($) Spend to Waive Min
Company
"average value"
BNZ NZ VISA Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ BNZ NZ MCD Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 21.95 44 24.00 N/A 500 12000 ✔ BNZ NZ VISA Standard GlobalPlus 21.95 44 55.00 N/A 500 12000 ✔ BNZ NZ VISA Classic Everyday 21.95 55 24.00 N/A 500 12000 ✔ BNZ NZ MCD Standard GlobalPlus 21.95 44 45.00 N/A 500 12000 ✔ BNZ NZ MCD Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ VISA Rewards Plus 55 21.95 55 39.90 N/A 500 12000 ✔ BNZ NZ AMEX Gold Rewards Plus5 21.95 55 95.00 N/A 4000 50000 ✔ National Bank of NZ VISA Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ National Bank of NZ MCD Thoroughbred 22.20 55 35.00 N/A 500 No max ✔ Westpac NZ Visa 21.90 55 29.00 N/A 500 No max ✔ Westpac NZ Super 14's Rugby Visa Cd 21.85 55 28.00 N/A 500 100000 ✔ Westpac NZ The Warehouse MasterCar 19.99 55 25.00 N/A 500 No max ✔ Westpac NZ MasterCard 21.90 55 29.00 N/A 500 No max ✔
"satisfactory value"
ANZ Bank NZ Visa Gold 21.95 55 80.00 N/A 7500 No max ✘ ANZ Bank NZ MasterCard Gold 21.95 55 80.00 N/A 7500 No max ✘ ASB Bank NZ Low Interest MasterCard 12.50 55 60.00 N/A 1000 No max ✘ ASB Bank NZ Visa 20.95 55 24.00 N/A 0 No max ✔ ASB Bank NZ MasterCard Gold 20.95 55 80.00 N/A 5000 No max ✔ ASB Bank NZ Visa Gold 20.95 55 80.00 N/A 5000 No max ✔ Bankdirect NZ Visa Gold 19.95 55 50.00 N/A 7500 No max ✘
BNZ NZ MCD Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ VISA Fee Saver 21.95 55 24.00 10000 500 12000 ✔
BNZ NZ AMEX Gold GlobalPlus 21.95 44 105.00 N/A 4000 50000 ✔ BNZ NZ Lite VISA Card 13.49 55 60.00 N/A 500 12000 ✘
BNZ NZ AMEX Gold Fee Saver 21.95 55 80.00 20000 4000 50000 ✔
BNZ NZ All Blacks MasterCard 21.95 55 35.00 N/A 500 20000 ✔ Kiwibank NZ Low Rate MasterCard 13.30 55 50.00 N/A 500 No max ✘ Kiwibank NZ MasterCard Zero 15.90 55 0.00 N/A 500 No max ✘ National Bank of NZ VISA Gold 22.20 55 75.00 N/A 7500 No max ✘ National Bank of NZ Freestyle MasterCard 18.20 0 0.00 N/A 500 No max ✘ Westpac NZ Low Interest MasterCard 13.90 55 65.00 N/A 500 No max ✘
Report Date: June, 2008
your guide to product excellence
Page 2 of 2 BIG SPENDER PROFILE SUMMARY:
YOUR GUIDE TO PRODUCT EXCELLENCE
What are the CANNEX credit card star ratings?
CANNEX credit card star ratings are a sophisticated rating methodology, unique to CANNEX, which compare the dominant credit card products in New Zealand and present the results in a simple, user- friendly format.
CANNEX rating methodology is transparent and extensive. The methodology compares all types of personal unsecured credit cards in New Zealand and accounts for an array of characteristics such as;
Free Days No Free Days Standard Features
Premium Features Reward/Loyalty Programs No Frills
The results are reflected in a consumer-friendly 5-star concept. The star ratings from the CANNEX credit card star ratings are described as follows:
Superior Product Average Product Excellent Product Satisfactory Product
Strong Product Rising Star
Only the top 75% of the credit cards examined actually receive a star rating between 1 and 5. Rising Stars are those products that would be rated 3-star or higher but have not been in the market for over 6 months.
Rising Star products will be formally rated in the next ratings period once more historical data is available.
What are the Profiles used by CANNEX credit card star ratings?
CANNEX appreciates that credit card users have different spending habits and therefore value different aspects of their credit card. In recognition of these differences, the CANNEX credit card star ratings methodology has been modified to reflect a range of spending styles and credit card usage.
CANNEX has adopted four different credit card user profiles in an attempt to cover the majority of card spending and payment patterns. The star ratings methodology differs for each profile in terms of the relative importance placed on the fees and features of the cards assessed. For example the methodology recognises that interest rates will be more important to someone who rarely pays off their card balance each month than they will be for someone who always pays the balance owing on their card.
How does it work? How are the ‘stars’ calculated?
Each credit card reviewed for the CANNEX credit card star ratings is awarded points for its comparative Costs and for the array of positive Features attached to the card. These features include rewards programs, premium card facilities, repayment capabilities and conditions attached to interest charging.
To arrive at the total score CANNEX applies a weight (w) against the Cost score (C) and the Features score (F). This weight will vary for each profile of credit card usage. The weight will reflect the relative importance of either costs or features in determining the best card for the type of credit card usage and payment.
W1
COST SCORE ( C ) +
W2FEATURES SCORE ( F ) = TOTAL SCORE ( T )
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2 Costs (C)
CANNEX compares both current and historical credit card pricing data to calculate the COST (C) component of each product’s overall score. Current data is used to calculate the annual cost to the cardholder for using each card. The cost of each card varies depending on the characteristics of the spending profile. Below are some of the spending and revolving details used in the calculation of the cost of each credit card.
1) Current Data –includes a scenario for each of the four credit card spending profiles
Habitual Spender - spends $12,000 per year while revolving $5,000
Everyday Spender - spends $24,000 per year while revolving $500
Impulse Spender - spends $3,600 per year while revolving $1,800
Big Spender - spends $60,000 per year while revolving $1,000
2) Historical Performance of Interest Rate – takes into account the product history. All current products assessed are grandfathered and subsequent calculations for each half-year will include an additional 6 months of historical rates until 12 months have passed.
Features (F)
Each card Feature (F) is allocated points. Points are awarded for positive credit card traits such as no fees or greater flexibility. The total features score for each category of information (eg repayment capabilities) is ranked and weighted with each category contributing to the overall Features Score (F). As Features are relatively static, they are not measured over time.
Weightings
The Costs and Features are weighted differently for each spending profile. This is done in recognition of the relative importance of the different product components to each profile.
The methodology for each profile is subtly adjusted to account for the differences between them. The process considers each profile separately and assigns weights representative of that profile (see table below). For the Habitual spender for example, the rates and fees associated with a card account for 70%
of that card’s total score and the features account for the remaining 30%. The cards targeting this user demographic have fewer features, less flexibility and compete mainly on pricing. The cards targeting the Big Spender on the other hand (eg. Gold, Platinum or rewards cards) typically offer more features. The Big spender profile has therefore been adjusted so that features account for 70% of the total score, while rates and fees account for 30%.
The Costs (C) plus Features (F) point scores are indexed and totalled to provide the Total Index Points.
Together they form the basis of the CANNEX credit card star ratings.
CANNEX credit card star ratings
TMWEIGHTINGS
COST (C FEATURES (F)
FREE DAYS / MINIMUM REPAYMENT
TOTAL (C+F)
Habitual Spender
70% 25% 5% 100%Everyday Spender
35% 60% 5% 100%Impulse Spender
60% 35% 5% 100%Big Spender
25% 70% 5% 100%∗
Cost calculations consider current and historical interest rates as well as ongoing fees associated with the cards∗∗
Features calculations consider features/parameters, flexibility, terms and conditions∗∗∗
Free Days contributed 5% of the overall score for the Everyday and Big Spender while Minimum repayments contributed 5% of the overall score for the Habitual and Impulse Spender.YOUR GUIDE TO PRODUCT EXCELLENCE
3
FEATURES CATEGORY HABITUAL SPENDER
EVERYDAY SPENDER
IMPULSE
SPENDER BIG SPENDER
ADDTNL FEES & CHARGES 3.00% 3.00% 8.00% 3.15%
LENDING TERMS 3.00% 3.00% 4.00% 3.15%
LATE PYMT INT CHARGING 3.00% 3.00% 3.00% 3.15%
MERCHANT ACCEPTABILITY 4.95% 5.10% 5.00% 4.90%
ONLINE TRANSACTIONS & SECURITY 4.05% 3.90% 4.00% 3.85%
PREMIUM CARD FACILITIES 3.00% 19.80% 5.00% 24.50%
REPAYMENT CAPABILITIES 3.00% 3.00% 3.00% 3.15%
REWARDS PROGRAM INFO 0.00% 12.00% 0.00% 15.05%
SPECIAL PURCHASING POLICIES 4.05% 5.10% 6.00% 7.00%
APPLICATION PROCESS 1.95% 2.10% 2.00% 2.10%
TOTAL FEATURES WEIGHT 30.00% 60.00% 40.00% 70.00%
How are the stars awarded?
The total score received for each profile ranks the products. The stars are then awarded based on the distribution of the scores according to the following guidelines. As you can see, only the cards that obtain a score in the top 5% of the of the score distribution receive a 5 star rating and only the top 75% of the score range receive a star rating.
L O W R A N K I N G
5%
10%
25%
15%
20%
25%
How many products and financial institutions are analysed?
In order to calculate the ratings, CANNEX analysed 79 Credit Card products from 11 financial institutions in New Zealand. In addition, over 100 parts of a product are analysed which includes product parameters, flexibility and operating terms and conditions.
How often are CANNEX credit card star ratings re-rated?
Products are officially re-rated every six months. The results are published in a variety of mediums
(newspapers, magazines, television, websites etc).
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