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The credit card is a handy piece of plastic - particularly in
this age of internet and phone shopping.
But New Zealand's credit card debt now stands at a whopping $4.5
billion.
Of the $4.5 billion owed nationally on cards nearly $3 billion
incurred interest in July at an average 18.8%. In the past year New
Zealanders have paid about $540 million in interest charges
alone.
Darryl Evans from the Mangere Budgeting Service in South Auckland
says the average person they see has about $43,000 worth of debt -
and multiple cards.
For people on low pay, out-of-work and students, credit cards are a survival mechanism and most families have three to four credit cards and store cards.
While the banks are dropping their interest rates, particularly for those in trouble with their cards, store and finance company cards are a different story. They are not regulated and their interest rates tend to be higher. The Warehouse's red card is the highest at 22.5%.
Iain Jamieson from Visa International believes if the banks are being regulated and can offer rates down at 11% then "there is a need to have these non-regulated entities brought into line."
One News approached the big banks to talk about credit card debt. Westpac refused to comment, while the BNZ and ASB failed to return calls. ANZ and National issued statements saying that they do give tips to customers on handling cards.
In a documentary shown in New Zealand recently an American legal
expert reported a conversation she had had with a top banker who
explained the attractions of credit cards for banks.
Harvard Professor Elizabeth Warren says she was told "if you cut
out the people who are least likely to repay, if you cut out the
most marginal borrowers - the ones who are deepest in trouble -
then you are cutting out the heart of our profits."
David Skilling from the think tank the New Zealand Institute, says being heavily indebted and having an economy driven by consumption is not going to get New Zealand into the top half of the OECD.
"It's not going to reverse the brain-drain or close the income gap between us and Australia."
And Skilling says some non-bank card companies could even go to the wall if too many stuck in the debt cycle owe them too much.
One online finance company which grants almost instant loans for those with bad credit histories shows its annual interest rate on its website is an eye-watering 520%.
