Westpac to charge 'interest on interest'

Westpac Banking Corporation says it decided to charge interest on credit card
interest charges and fees to align the bank's approach with industry standards.
Treasurer Wayne Swan and Finance Minister Lindsay Tanner have both slammed Westpac
for the decision, with Mr Swan calling Westpac a "serial offender" when it came to
taking "customers for a ride".
Westpac spokeswoman Jane Counsel said the bank had no reaction to these comments.
"We've aligned our processes with industry standards and are charging interest on
interest which is essentially what we do with savings products as well," Ms Counsel
said.
Westpac wrote to customers on Monday advising that the additional interest charges
would apply from June.
Westpac customers who revolve credit card balances will be charged interest on the
interest accrued every month, as well as interest on fees applying to the monthly
balance on the card, she said.
A card carrying a balance of $3,500 would be charged an additional 61 cents in
interest based on the monthly interest charge of $51 derived from an interest rate
of 17.5 per cent.
About 46 per cent of Westpac's credit card customers do not pay their balance in
entirety every month and will be affected by the policy, she said.
Commonwealth Bank of Australia also charges interest on interest and fees, spokesman
Steve Batten said.
National Australia Bank's Luisa Ford said the bank charges interest on interest, but
not on fees.
"The system doesn't charge the fee. So if there is an annual fee on it, it deducts
that from the total of the credit card bill and doesn't charge interest on it," she
said.
ANZ Banking Group did not return calls.
Research conducted by financial information website RateCity on more than 300 credit
cards found there were more than 40 different types of fees that financial
institutions charge credit card customers.
"The average credit card rate is 16.30 per cent, which means you would be paying
$489 per year on an average $3,000 debt per card," RateCity's chief executive Damian
Smith said last week.
Ms Counsel dismissed as inaccurate reports that Westpac's chief executive Gail Kelly
had told a private shareholder briefing the bank was under financial pressure to
raise its interest rates but feared a political backlash.
ANZ spokesman Stephen Ries later said the bank charges interest on interest and
fees, and has done so since 2005.