Banks appear to be discriminating against older customers in one key area, according to a new report.
On the surface, the practice may appear prudent, but the one-size-fits-all policy is unfair, say many older Australians and consumer advocate CHOICE.
The issue is credit cards. On the plus side, banks are largely eliminating loans being taken out by individuals who are likely to struggle or be unable to service the debt.
However, there is anecdotal evidence that these same banks are also denying loans to customers who say they demonstrably can afford repayments. And those customers are claiming that the banks are making those decisions based purely on their older age.
CHOICE cites these recent examples: Chris, a self-employed 71-year-old from Sydney, and Marilyn, a 72-year-old self-funded retiree looking to build up her own credit history, having been the secondary cardholder on her husband’s card for several years.
Chris applied for a credit card via the Commonwealth Bank’s online portal, but his application was denied, accompanied by a message saying he didn’t qualify.
Read: Applying for a credit card on the Age Pension
Sometimes the rules surrounding online applications can be subject to rigid rules that don’t suit all circumstances, and a chat to a bank representative in person can resolve such anomalies.
(I can claim personal experience in this, having once had an application for a loan restructure that was to reduce my repayments denied. After a quick visit to the bank, the manager overrode the rules that had initially resulted in a ‘computer says no’ response.)
Chris hoped that this would be one such case but when he spoke to the bank, he was shocked to be told it would be “unsafe” for him to have more credit, despite him demonstrating a clear income stream that showed he could comfortably cover the repayments.
Even after Chris offered to reduce the amount of another existing card in his name so that his total credit would remain the same, the bank denied his request.
Read: Threat of ‘postcode discrimination’ skewing credit scores
For Marilyn it was a different bank – ANZ – but she received the same response – she did not meet the bank’s lending criteria. Like Chris, Marilyn said she could easily have taken on the cost of the card.
Why, then, are banks doing this? Credit cards are, after all, a core part of their profitable business. It seems that this could be where age becomes a factor. Older people, as a rule, tend to pay off their outstanding balances in full every month, in stark contrast to those (usually younger) customers who pay off only the minimum.
It is, of course, those who pay off the minimum from whom the banks profit most. This may lead banks to adopt a ‘what’s in it for us?’ attitude to older borrowers, and then turn their applications down when they realise the answer is probably going to be somewhere between ‘not much’ and ‘nothing’.
Read: Will a loan affect your Age Pension eligibility?
CHOICE points out that Chris and Marilyn are not isolated examples and that many other retirees have shared similar experiences. When approached for comment, the Commonwealth bank did not respond to CHOICE’s question about age being a factor and the ANZ stated that age did not come into the decision-making process.
Ian Yates, chief executive of advocacy group COTA, argues that banks and regulators should be more flexible and pay closer heed to the financial situation of older Australians before refusing to grant them credit due to irregular incomes that may include dividends and occasional wages.
Until that happens, though, you might have to shop around more than you had hoped, or make sure you get a loan approved before you reach the age at which the big banks think you’re ‘too old’ for a credit card.
Have you applied for a credit card recently? Were there age-related hurdles? Why not share your experience and thoughts in the comments section below?
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