What consumer can’t get behind that?
The thing is there are a whole bunch of wrinkles and rule interactions in the broader system now that will remain long after this safety-over-sales crackdown… and could still see you pay more and/or get less.
Here are the newly bad banking behaviours to avoid if you want to take advantage of the brave new wealth world.
No-no No.1: Maintaining spending before asking for money
Far more onerous responsible lending tests mean intense scrutiny of your expenses in the three months before applying for a loan. Cut them or face a reduced approved loan amount… or even outright rejection.
Of course, this is easier said than done, especially now our transactions are typically by card not cash.
Two in five Aussies who use tap-and-go or a digital wallet admit to not always checking the sale amount before paying, says Canstar research exclusive to Money.
First homebuyers are among the worst offenders, with almost one third making this mistake (although kudos Gen Z, the age group most likely to look at the take before they tap).
Sign up for the free TrackMySpend app put out by moneysmart.gov.au
The beauty of this is it’s manual — and having to physically input your outgoings gives cause for pause.
No-no No. 2: Being relaxed about your credit record
Since July 1 last year we have had a fully-fledged US-style credit score because that’s when the big banks began reporting the consumer information that allowed it.
Somewhat curiously, more data exclusive to Money reveal that credit scores held with one of our three national credit bureaux, Experian, have since increased.
The survey of more than nine million credit-card holders shows a marginal average 2.6 per cent lift in credit scores. One of the highest jumps, 3.9 per cent, was among blue-collar workers living in outer city suburbs and regional Australia.
This is all part of the shift to “positive” credit reporting, which says nothing about your data but simply how much is collected. Now a lot.
Particularly, be aware your score will go down each time you apply for credit (and don’t just keep applying if you’re refused by one provider, say, on the above grounds) or if you miss a credit repayment by as few as 14 days (something held on your record for the next two years).
For example, Experian also found that the “Aussie battlers” who have benefited most overall are actually the highest credit risk group — twice as likely to miss three credit card repayments versus “affluent retirees living in high-valued properties”.
Don’t miss that already we have what I feared most from all this disclosure: personalised penalty pricing.
In other words, the more model you are as a money citizen, the cheaper your interest rate… and vice versa, which slugs the people who can least afford it, the most.
No-no No.3: Reducing credit card limits
I never thought I’d be espousing the virtues of credit… but cut up or cut down a card today and you may never get it back (that goes doubly if you’re 50-plus).
So, it’s now something you need to think about carefully (unless you don’t have the discipline to return your balance to zero pronto).
New — sensible — rules that came in on January 1 require applicants to be able to clear their full issued credit limit with three years of disposable income. Hello lower limits.
Meanwhile, older — also sensible — rules mean a higher limit could well lower the home loan for which you are approved. Hello conundrum.
Weigh your next credit move carefully.
No-no No.4: Getting complacent about an interest-only loan
If we are talking about your home loan, you shouldn’t have interest-only in the first place (the only exception might be if you know you’ll turn the property into an investment).
You want to eventually pay it off, not pay a fortune in non-reducing interest to your lender… for nothing.
Now this strategy, which I believe was promoted by many mortgage brokers in a bid to maximise commissions and Commissioner Hayne’s ban plan seems to back up, has been under fire for years from the corporate watchdogs… the over-leveraging poses risk to property prices.
When it expires, your current interest-only period is unlikely to be renewed and that could mean a repayment jump I’ve calculated at an average 63 per cent.
The tighter lending environment (and let’s not forget the commission’s revelations about “liar loans” written by brokers and bankers) means any material change to your existing loan, like a time extension, might not pass serviceability tests either.
Get paying your loan down, or better still, filling up the offset account. Now.
No-no No.5: Posting updates that would (soon) interest an insurer
A commission measure deserved of some of the biggest commendation is requiring insurers be “reasonable” about what policyholders need to disclose.
There have been just so many cases of companies seizing on an innocently omitted medical detail, to deny a payout years later, even if it’s an innocuous doctor’s visit between insurance application and acceptance.
But know that New York’s financial regulator has just given life insurers permission to trawl the public social media accounts of policyholders for health factors to set pricing… so that party lifestyle could see you pay more.
Indeed, already here insurance investigators have gone through social media to ascertain whether a claim is genuine.