Credit card payments are often among the first loans people stop paying during economic crises because they are usually unsecured. Lenders are bracing for this to be the case during the COVID-19 crisis.
Indeed, the NAB Financial Anxiety Index rose for the third consecutive quarter in the first quarter of 2020, with 4 in 10 Australians reporting having experienced some form of stress or financial difficulty in the past three months. Banks are therefore preparing to face more difficult times alongside their customers, as consumer spending is an important source of income.
Westpac has announced a three-month hiatus on refunds and interest for customers who have been affected by the COVID-19 pandemic, and will not require those customers to make refunds during that time.
As part of Westpac’s support program, consumers will not be charged or accrued interest on new card purchases or cash advances (although a cash advance fee still applies) nor will they accumulate interest on existing amounts owed.
To be eligible, Westpac credit card holders will need to have been up to date with minimum refunds at some point in the past 90 days and have had the credit card on 1st January. You can view all of the requirements for Westpac’s Credit Card Relief Package. here.
Most of the major Australian banks continue to charge interest but have lowered their rates. For example, starting today, NAB reduces the minimum monthly payment to 0.5% of the closing balance until at least 24e July. NAB also reduces the standard purchase interest rate on personal NAB Low Rate Classic cards to 12.99%.
ANZ does not yet offer lower rates. Instead, the bank encourages customers facing financial difficulties to contact them to switch to a product with lower interest rates or credit limits.
CommBank will reimburse late payment charges and / or interest for March 2020 for qualifying credit card holders, but has not specified whether this will be extended until April.
ING allows credit card payments to be suspended for three to six months, but interest and charges will still accrue during this period.
Given the difficult times ahead, we may see the major banks introduce more support measures. Today, Roy Morgan reported that a staggering 10.5 million Australian workers have seen their employment situation altered by the COVID-19 pandemic, of which 2.7 million have been dismissed.
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