Credit card fees for late payments

Money
1

For at least the past 15 years I have had the full balance of our ANZ credit cards debited automatically from one of our cash accounts with ANZ. In doing so, I had to ensure that on the due date there would be sufficient funds in the cash account to cover this automatic debit. With the ANZ app on my phone I have been able to do that no matter where I might be on that day.

With net and phone banking I always checked all the account balances and transactions well before the close of business, which has always been 10.00 pm AEST, and on the day the credit card balance was due to be processed, I have always transferred cash from our Savers account to our Access account, never a problem provided this was carried out before the day’s c.o.b., i.e. 10.00 pm AEST.

On 7 November 2022 the balance of our credit card for September credit card purchases fell due, and as usual, that night, well before 10.00 pm AEST I transferred the required amount (plus some) from our Savings to Access account. The following night I noticed that no payment had occurred from our Access account, nor the following day - I thought there might have been an issue at the bank’s end. But when afer a week there was still no action by the bank I dediced to call ANZ Support.

ANZ Support is handled by an off-shore call centre somewhere in the sub-continent, and they took well over 30 minutes to answer my call. Communication was difficult to put it mildly, partly my poor hearing but also the accents of the operator, and it took 5 or 5 minutes to complete all the ID checks before I could explain my issue - the operator told me that he needed to transfer my query to another section, so I was placed on hold for 15 more minutes before someone picked up my line…only to once again go through the same ID process!

I’m a reasonably patient fellow, but I started to feel qite exasperated. After a bit over an hour all up I was finally informed that I had a problem, because when the bank swept my accounts to take payment for the credit card balance there were no funds to cover the balance, and when payment is declined the system decides that’s final, so she told me I had been hit with a late payment plus interest charge on the credit card account!

When I protested that there was in fact sufficient money in our savings account by c.o.b. she checked further and informed me that my account was swept at 7.00 am!

Ever since I have used netbanking (now also by phone) for both our small business and personal bank accounts it has always been the case that availability of sufficient funds to cover payment of credit card balances had to be concluded by the day’s c.o.b. and was not dependent of the time of day when the sweep occurred.

Not any more apparently - the aftermath was that I was refunded in full by the operator after she accepted my explanation.

It would have been nice if this change in policy terms had been made clear by ANZ to its customers, perhaps it appeared somewhere in small print when banks send out notices about change in terms of accounts, but who actually bothers to read these??

On that last point I thought that I read somewhere a long time ago that the ACCC had made a ruling that financial institutions, insurance companies etc were required to include a brief outline of all salient matters in plain English when sending out volumes of pages in legal terms of changes in conditions for consumers - if not, maybe CHOICE could work on this on behalf of its members.

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That is the problem in a nutshell.

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Was direct debit timing established in terms or conditions or an assumption that since this time was repeated regularly, it must be ‘set in concrete’?

Looking at the T&Cs, they don’t stipulate a time on the payment day a transaction will be made.

Generally payments would attempted anytime on the day set for the card’s account, rather than a specific time.

Banks also generally suggest sufficient funds or payments are available in advance of the transaction occuring. This could be up to 48 before the date of payment in the case of interbank EFTs.

Possibly it is a lesson learnt to ensure there are sufficient funds to cover the end of month statement amount before the payment date (say day before), rather than trying to anticipate the time on the payment date the transaction might occur.

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In the olden days, bank processing was online during the day, and then batch processing during the night.
These days processing occurs 24 hours a day.
So if you have a direct debit due on a particular day, then the funds need to be there at the start of the day. Which is midnight.
So change your transfer ritual to make sure it is done the day before.

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I have a Westpac card auto-debited to an ING account. The Westpac card does not show the payment (debit) applied until close of business on the due date. One has to expect they have received an authorisation from ING but although I always have funds available early on but not always prior to the due date, the debit is not shown as posted to my account at ING until the second following day. What happens ‘behind the curtains’ has stayed behind the curtains.

In contrast an ING card auto-debited from the same account is processed and posted at start of the due date so funds must be there the prior day.

Having just reviewed Westpac’s documentation the only obvious references to timing are the ‘due date’ on the monthly statement and on the auto-debit authorisation form, (bold added)

If you are uncertain as to when a debit will be processed from your nominated account, please check with the financial institution where your account is held;

As @Sanctorum’s card and payment accounts are both at ANZ it simplified identifying the change. When multiple banks are involved it seems strange to check with the paying bank rather than the drawing bank, but.

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My utility providers text me a few days before the bill is due to remind me to have sufficient funds in my account. They give me the ‘due’ date, e.g. 16-11-22, which starts at 12am on the 16th. I understand that funds could be withdrawn at any time during that day. Shouldn’t the customer also have the freedom to deposit funds during that period and the account checked at the end of the day for sufficient funds?

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Bingo. A manual payment is on time as long as the payment is made that business day. If it is made by BPay lodged on the due day it might not journal for 2 more days but is still deemed on time. Manual payment assures ‘good funds’ are there at the moment ‘send money’ is pressed so no issue with any race conditions for deposits.

Taking it at start of business or 12:01am? Since an account due on 26 November can be paid and on time until close of business it could be argued an automatic payment system should not debit an account prior to close of business. If that was assured a customer would have confidence a deposit made during the due day would cover the required balance.

As the topic reveals automatic systems are dependant on the card issuer as well as the funding account/bank system; the process should be standardised to mimic a manual payment system - but I doubt this is something on our ‘regulators’ list of to do’s.

Advising customers payments would be taken prior to the due date? If one has an interest free period but takes payments earlier than the due date it is equivalent to a charge for their auto-debit service re the interest float. Is transparency of publicising that however it is done sufficient? Not everyone will agree just as not everyone is happy to enable automated payments because of a feeling (rightly or wrongly) of loss of control.

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With my CBA based payments, as long as the account has funds before the close of the business day the payments are made. An attempt usually occurs shortly after 9.00 am and if not enough in the account another attempt is made before 5 pm. My income hits my account roughly at Midnight (at the moment they are made at midnight DST), and with my text alerts I’m aware the withdrawals start around 9 am.

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ANZ Card terms uses the terms ‘by the due date’ and not ‘on the due date’ or ‘at the end of the due date’.

This suggests that payments (or sufficient funds to cover a payment) need to be made (or available) by the due date. This means that an account would need sufficient funds to cover any payments before the due date occurs, which would be 12am (as indicated by @Gaby). One shouldn’t assume that ‘by the due date’ is any time on the day of the due date.

The chances of success in challenging ANZ for failing to have sufficient funds in one’s account at some time on the due date is unlikely to be successful. If the funds were in the account at 23:59:59 on the day before the due date and fees/interests were similarly charged, then this would be a very different situation.

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Considering a bill must be paid by the due date that generally is taken to mean on or before the due date, not just before it, the context of ‘by….’ has always been confusing. ‘Before’ would provide better clarity if that is the intention. To many people by is rightly or wrongly taken to be the close of business on the day.

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Thanks for all the feedback, and yes, I’ll be making sure in future to transfer the required funds before midight the day before the due date. It’s probably not a big deal, I know, but Australia’s four big banks (and credit card companies) make mega million dollars profit every year and bringing the transfer process forward is yet another way they boost their profits!

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It is a urban myth that transfer monies and time taken makes big profits for banks, but that is a different topic.

The only disadvantage for you is if you have a high interest account where interest is calculated daily, then you might lose out a little bit (difference in interest between the two accounts being used to hold the monies). The cost of missing the payment time will be significantly more if this scenario exists for you.

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I think that is the reason some play transferring games between accounts.

For a long time now transaction accounts pay essentially zero interest. Whereas saver accounts pay interest. Calculated daily.

But it is just not worth playing these games if it means some processing timing issue on the day means that you then are hit with charges, or lose your pay on time discount, and then have to spend possibly hours with some support function trying to get the charges reversed.

All for a tiny amount of interest for one day?

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