Nick Bruining: Why are WA retirees being denied credit cards by the banks?

It was a simple talkback call complaining about seniors’ access to credit cards that triggered a near-meltdown of the ABC Mornings switchboard.

This was followed by dozens of text messages echoing the same issue — and the anger was palpable.

Retirees — some with millions of dollars in assets and significant regular incomes — are unable to get a credit card, with the major banks appearing to be the main offenders.

Independent financial planner David Jarrot confirmed it’s a widespread problem.

“You have people who have worked all their lives and have considerable retirement savings with lifelong loyalty to their bank,” Mr Jarrott said.

“Now retired, their bank won’t give them a credit card, but will to their 20-year-old grandchild with a part-time job.

“They also miss out on things like included travel insurance and loyalty programs, which can save some retirees lots of money”

Many credit cards are issued while a person is still in the workforce, with a “primary account holder” as the person ultimately responsible for the debt. An additional secondary card holder, often the partner, is linked and allowed to transact on the primary account.

The problem arises when the primary account holder dies. The secondary holder is now forced to obtain a credit card in their own right.

One solution is to ensure each member of a couple establishes their own credit card account before they retire.

Credit cards are a basic necessity in the digital age, with a significant proportion of business now conducted online. It becomes critical for those travelling, with tickets, accommodation and transport often only available through online purchases.

Credit and debit cards are usually issued by Australian banks using the US-based card behemoths Visa and Mastercard. Debit cards are linked to a specific savings account, with available funds limited to the account balance. Credit cards, on the other hand, are linked to a line of credit.

Once a transaction occurs, the actual funds are transferred to the merchant at “settlement”, which occurs at a later time.

Importantly, when a merchant receives a payment authorisation on a credit card transaction, they are generally assured of receiving the payment at settlement.

That might not be the case with a debit card, because settlement may occur when the linked account balance has been depleted.

In many cases, merchants will not accept a debit card for payment because there are no guarantees they’ll receive the money.

“This also presents a risk to the customer in that a hacked debit card could potentially clean out an account with tens of thousands of dollars,” Mr Jarrott said.

“A credit card, on the other hand, is limited to the credit limit, which may be only a few thousand dollars.”

Because most credit cards are a form of unsecured loan, lenders need to be certain the holder of the card has sufficient funds and income to repay the debt.

Almost all the complaints made by callers to the station were associated with the big four banks.

Your Money approached ANZ, Commonwealth Bank, NAB and Westpac, asking them why they wouldn’t provide credit cards to seniors.

All said that while there was no upper age limit to issuing cards, they “comply with the National Consumer Credit Act”.

Smaller regional banks are also required to comply with the same Act, but appear to have different internal policies.

WA-based P&N Bank said all applications were assessed to ensure the product was suitable for the customer and “that we are meeting our responsible lending obligations”.

“Superannuation, aged, veterans and disability pensions are acceptable income sources, with 100 per cent of the income able to be utilised for servicing needs,” it said.

Many of the smaller banks often provide deposit accounts paying retirees interest rates significantly higher than the big four.

Mr Jarrot suggests the reluctance of the big four to assist seniors might be tied to profitability.

“My guess is they’re not interested because retirees pay off the balance owing each month, and hence the banks don’t get to collect their 20 per cent a year interest rate on the outstanding amount,” he said.

‘Not discrimination, but effect the same’

While Doug and Margaret Walsh have heard plenty of stories about the frustrations seniors have obtaining credit cards, through their firsthand experience they can now add their names to the list of angry bank customers.

A credit card application lodged with Westpac-owned St George Bank was recently knocked back.

Mrs Walsh is president of Australian Independent Retirees, a nationwide group of seniors that, by definition, relies on minimal support from the Federal Government to fund their retirement income needs.

“Our members are predominantly those who have worked all their lives to provide for themselves in retirement,” she said.

“You can’t achieve that outcome unless you have the financial resources to do so, but that doesn’t mean the banks will give us a credit card.

“Many of our members have been with the same bank throughout their working lives — they’ve bought homes, cars, sometimes built successful businesses with the same bank.

“But that counts for nothing once you’re retired.”

Like many credit card users, the Walshes were originally attracted to the loyalty point program offered by NAB.

“We were no longer able to make use of the points and decided to apply for the low-cost card,” Mrs Walsh said.

“Doug and I had two joint accounts with St George for more than 20 years and always with a decent balance.

“We thought it would be easy.”

But their application was turned down.

While the Walshes weren’t given a detailed reason for the rejection, they suspect age was a factor.

“It’s not just the banks and credit cards, our members tell of other problems when dealing with organisations after a death including phone, power gas and other utilities,” Mrs Walsh said.

Many seniors now choose not to notify their bank or other supplier of a death, simply to avoid the problems associated with obtaining a new credit facility.

“You can dress it up as much as you like — referring to policies, codes and responsibilities — but the fact is, it’s the seniors that are dealing with this issue on a day-to-day basis, and often at a time of great stress while grieving,” Mrs Walsh said.

“Maybe it doesn’t meet the definition of age discrimination but the effect is the same.”

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association