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[04:55:01 AM Thursday, March 27, 2008]
Australian Credit Card Issuers' Generosity Goes Beyond All BoundsTraditionally, groups of credit consumers protected from the ever rising credit card rates and other charges, have been those who show excellent payment records and high FICO scores. But things seem to be strikingly different in Australia recently. Banks are being more and more liberal towards the so-called sub-prime customers and are lending them unbelievably generous credit lines with no interest periods on purchases and balance transfers. Could it ever be at least thinkable on the US credit card market? Yes, US issuers do offer cards to the underbanked, but have you ever seen a plastic with no interest rate or free balance transfers for a bad credit customer? More likely, you haven't. Then read on to learn how it is possible in Australia. Credit card debt is no longer a barrier for Australian issuers to shower customers with 0% on balance transfers and purchases, and they site the spring time as the main reason to become that generous. The push of online advertising promoting such irresistible bank offers has become even stronger and among the most active issuers are The St George Bank and HSBC. HSBC encourages bad credit customers to apply for one of its cards and so save on purchases that are in full swing at this time of a year: saving has never been easier with 0% intro APR on purchases! While the growing credit generosity of Australian banks is likely to boost consumer spending by thousands of dollars and thus lead to the inflationary effect, this whole thing does not seem to alarm the Reserve Bank. Likely, its unruffled calm comes out of the assurance that the higher costs associated with higher credit risks will be covered by another type of credit consumers - mortgage debtors. With all this, it seems that it is Australian home owners but not credit card holders that have been affected by the all too free lending practices in the USA. Mortgage interest rates are rising and covering the costs that banks are incurring. Whether it is fair and justified is a big question that remains unnoticed and unanswered by the issuers. It is even more interesting to understand why the Reserve Bank is so much disturbed by the government's plan to invest in health and education. Probably, the inflationary impact of the government's investment will be similar to the inflation induced by the boost in consumer spending and living on credit, but can we compare the results? While the government's investment will improve productivity and reduce the inflation with the lapse of time, the bank's credit lending generosity will do nothing but further impair the financial standing of Australian credit consumers and the country's economy. With no or very low interest rates, the inflation will only flourish, but it will benefit the lenders. The last question coming out in connection with it - are the banks really being generous? |
