Some Banks Want To Consign Credit Card Interest To History
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Some Banks Want To Consign Credit Card Interest To History

Australian lenders hope no-interest cards can arrest a decline in usage and attract younger customers.

By ALICE URIBE
Tue, Jan 12, 2021 12:30amGrey Clock 4 min

Interest charges have been one of the defining features of credit cards for decades and so when an employee at a big Australian bank suggested getting rid of them, he was taking a risk.

“He said, ‘Well, what about a no-interest credit card?’ ” said Rachel Slade, personal banking group executive at National Australia Bank Ltd., recalling a feedback session at one of the lender’s Melbourne offices. “And everyone’s like, ‘What? That’s not how a credit card works.’ ”

Worried about dwindling credit-card usage during the coronavirus pandemic and the rapid rise of startups like Australia’s Afterpay Ltd. and Sweden’s Klarna Bank AB that allow consumers to pay for goods in instalments, some banks are rethinking what has been one of their most lucrative businesses.

National Australia Bank, known locally as NAB, launched a no-interest credit card in September. Users get a fixed line of credit and the bank levies a monthly fee, which is refunded if the customer maintains a zero balance and doesn’t use the card. Commonwealth Bank of Australia, the country’s largest lender by market value, also unveiled a no-interest card last year.

The experiment isn’t being replicated in the U.S. where most credit-card issuers charge interest when cardholders carry balances. But if they prove to be successful, Australian banks’ no-interest cards could drive change in other markets.

Fees on the cards offered by NAB and CBA vary according to credit limits. For example, a balance of $1000 Australian dollars on CBA’s no-interest card could accrue nearly $484 in fees over 40 months if there is an outstanding balance each month. The same balance on the NAB card repaid at that product’s minimum rate would cost about $292 over 29 months.

In both cases, that is more than the interest accrued by a customer making the same repayments on a regular card with a 16.6% annual percentage rate, the typical rate in Australia. And like with other cards, customers are required to make minimum monthly repayments on any outstanding balances.

Still, the banks are betting that consumers will like the products for their simplicity. No-interest cards are designed to give customers more control over their spending via a product that is easy to understand, said Angus Sullivan, CBA’s group executive of retail banking services.

According to Australia’s central bank, the country’s credit and charge card balances fell by almost 34% in the two years through October to the equivalent of $21.17 billion. More than 60% of the decline came in March and October last year as the pandemic pushed Australia’s economy into recession.

Over the same period, debit-card transactions locally grew by 4.7% in number and by 5.6% in value, to hit more than the equivalent of nearly $33 billion.

Some analysts view the no-interest cards as a salvo in an intensifying battle for share of the payments market between banks with large credit-card businesses and buy now, pay later providers like Afterpay and Zip Co.

In Australia, buy-now-pay-later services don’t need to verify income or check existing debts held by users, which makes it easier for consumers to gain access to those products than a traditional credit card.

According to their most recent half-yearly filings, Afterpay and Zip respectively count 14% and 9% of Australia and New Zealand’s combined adult populations as customers. The average age of the 3.3 million Australians and New Zealanders using Afterpay at the end of June was 35 and 33, respectively.

Ms Slade said NAB’s no-interest card aims to attract younger customers who don’t necessarily have strong ties to the bank, illustrating a broad concern among traditional lenders that they are losing out in the battle for millennials.

In the three months since launch, the StraightUp card was among NAB’s three most popular credit cards among new applicants. Demand was strongest among customers under 40 years old, the bank said.

Tom Beadle, an analyst at UBS Group AG, said it is unlikely that no-interest credit cards in Australia will be a material threat to the buy now, pay later sector. This is because the consumer still needs to pay for the cards through upfront fees of up to $22 a month.

In contrast, buy now, pay later services often charge no interest and are generally free to users who make payments on time. A survey published by UBS in October found that most buy now, pay later users valued the payment method because it helped them to budget and they considered it convenient.

“The whole beauty of Afterpay is that it’s just really simple: It’s free,” Mr Beadle said. “People just want simplicity, and Afterpay have absolutely nailed that.”

Afterpay and Zip have made no secret that they intend to challenge credit-card providers. In August, Zip said the credit card industry was fundamentally broken, citing high revolving interest, confusing terms, a lack of trust and an absence of brand loyalty that had accelerated a structural decline in usage.

Four years after its debut on Australia’s stock market with a market value of $149 million, Afterpay is now worth US$32.7 billion. Afterpay and Zip are also expanding in the U.S., recording a combined A$7.4 billion Australian dollars in transactions on their networks in the six months through June.

Still, the UBS survey, based on 1,000 respondents, found a “not insignificant proportion” of users appear to regard buy now, pay later as a line of credit. Some 25% of users said they couldn’t afford a product with their existing savings, while 12% said they couldn’t get approval for a credit card.

Australia’s experience could offer lessons to the U.S., where lenders are also seeing a decline in credit-card usage and growth in debit-card usage, although it will take time before banks can be sure no-interest cards are popular.

Credit reporting firm Experian PLC said that U.S. consumer credit card debt in 2020 contracted for the first time in eight years. After hitting a record high of US$829 billion in 2019, balances decreased by 9% in the past year.

At Visa Inc. and Mastercard Inc., U.S. debit-card dollar payment and purchase volume collectively rose 23% year-over-year in the quarter ended in September, more than double the pre-Covid-19 growth rate; the same measure for credit cards was down 8%.

Some American credit-card issuers are seeking to slow the buy now, pay later industry’s growth in other ways. Late last year, Capital One Financial Corp. stopped their cards from being used to make Afterpay purchases and payments, the Australian company said.



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A Killer Golf Swing Is a Hot Job Skill Now

Companies are eager to hire strong players who use hybrid work schedules to schmooze clients on the course

By CALLUM BORCHERS
Fri, Jun 14, 2024 5 min

Standout golfers who aren’t quite PGA Tour material now have somewhere else to play professionally: Corporate America.

People who can smash 300-yard drives and sink birdie putts are sought-after hires in finance, consulting, sales and other industries, recruiters say. In the hybrid work era, the business golf outing is back in a big way.

Executive recruiter Shawn Cole says he gets so many requests to find ace golfers that he records candidates’ handicaps, an index based on average number of strokes over par, in the information packets he submits to clients. Golf alone can’t get you a plum job, he says—but not playing could cost you one.

“I know a guy that literally flies around the world in a private jet loaded with French wine, and he golfs and lands hundred-million-dollar deals,” Cole says.

Tee times and networking sessions have long gone hand-in-golf-glove. Despite criticism that doing business on the course undermines diversity, equity and inclusion efforts—and the fact that golf clubs haven’t always been open to women and minorities —people who mix golf and work say the outings are one of the last reprieves from 30-minute calendar blocks

Stars like Tiger Woods and Michelle Wie West helped expand participation in the sport. Still, just 22% of golfers are nonwhite and 26% are women, according to the National Golf Foundation.

To lure more people, clubs have relaxed rules against mobile-phone use on the course, embracing white-collar professionals who want to entertain clients on the links without disconnecting from the office. It’s no longer taboo to check email from your cart or take a quick call at the halfway turn.

With so much other business conducted virtually, shaking hands on the green and schmoozing over clubhouse beers is now seen as making an extra effort, not slacking off.

Americans played a record 531 million rounds last year. Weekday play has nearly doubled since 2019, with much of the action during business hours , according to research by Stanford University economist Nicholas Bloom .

“It would’ve been scandalous in 2019 to be having multiple meetings a week on the golf course,” Bloom says. “In 2024, if you’re producing results, no one’s going to see anything wrong with it.”

A financial adviser at a major Wall Street bank who competes on the amateur circuit told me he completes 90% of his tasks by 10 a.m. because he manages long-term investment plans that change infrequently. The rest of his workday often involves golfing with clients and prospects. He’s a member of a private club with a multiyear waiting list, and people jump at the chance to join him on a course they normally can’t access.

There is an art to bringing in business this way. He never initiates shoptalk, telling his playing partners the round is about having fun and getting to know each other. They can’t resist asking about investment strategies by the back nine, he says.

Work hard, play hard

Matt Parziale golfed professionally on minor-league tours for several years, but when his dream of making the big time ended, he had to get a regular job. He became a firefighter, like his dad.

A few years later he won one of the biggest amateur tournaments in the country, earning spots in the 2018 Masters and U.S. Open, where he tied for first among non-pros.

The brush with celebrity brought introductions to business types that Parziale, 35 years old, says he wouldn’t have met otherwise. One connection led to a job with a large insurance broker. In 2022 he jumped to Deland, Gibson Insurance Associates in Wellesley, Mass., which recognised his golf game as a tool to help win large accounts.

He rescheduled our interview because he was hosting clients at a private club on Cape Cod, and squeezed me in the next morning, before teeing off with a business group in Newport, R.I.

A short time ago, Parziale couldn’t imagine making a living this way. Now he’s the norm in elite amateur golf circles.

“I look around at the guys at the events I play, and they all have these jobs ,” he says.

His boss, Chief Executive Chip Gibson, says Parziale is good at bringing in business because he puts as much effort into building relationships as honing his game. A golf outing is merely an opportunity to build trust that can eventually lead to a deal, and it’s a misconception that people who golf during work hours don’t work hard, he says.

Barry Allison’s single-digit handicap is an asset in his role as a management consultant at Accenture , where he specialises in travel and hospitality. He splits time between Washington, D.C., and The Villages, Fla., a golf mecca that boasts more than 50 courses.

It can be hard to get to know people in distributed work environments, he says. Go golfing and you’ll learn a lot about someone’s temperament—especially after a bad shot.

“If you see a guy snap a club over his knee, you don’t know what he’s going to snap next,” Allison says.

Special access

On a recent afternoon I was a lunch guest at Brae Burn Country Club, a private enclave outside Boston that was the site of U.S. Golf Association championships won by legends like Walter Hagen and Bobby Jones. I parked in the second lot because the first one was full—on a Wednesday.

My host was Cullen Onstott, managing director of the Onstott Group executive search firm and a former collegiate golfer at Fairfield University. He explained one reason companies prize excellent golfers is they can put well-practiced swings on autopilot and devote most of their attention to chitchat.

It’s hard to talk with potential customers about their needs and interests when you’re hunting for errant shots in the woods. It’s also challenging if you show off.

The first hole at Brae Burn is a 318-yard par 4 that slopes down, enabling big hitters like Onstott to reach the putting green in a single stroke. But to stay close to his playing partners and keep the conversation flowing, he sometimes hits a shorter shot.

Having an “in” at an exclusive club can make you a catch. Bo Burch, an executive recruiter in North Carolina, says clubs in his region tend to attract members according to their business sectors. One might be chock-full of real-estate investors while another has potential buyers of industrial manufacturing equipment.

Burch looks for candidates who are members of clubs that align with his clients’ industries, though he stresses that business acumen comes first when filling positions.

Tami McQueen, a former Division I tennis player and current chief marketing officer at Atlanta investment firm BIP Capital, signed up for private golf lessons this year. She had noticed colleagues were wearing polos with course logos and bringing their clubs to work. She wanted in.

McQueen joined business associates on the golf course for the first time in March at the PGA National Resort in Palm Beach Gardens, Fla. She has lowered her handicap to a respectable 26 and says her new skill lends a professional edge.

“To be able to say, ‘I can play with you and we can have those business meetings on the course’ definitely opens a lot more doors,” she says.

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This stylish family home combines a classic palette and finishes with a flexible floorplan

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