The Consumer Council has released the results of a survey on 22 credit card companies offering a wide array of gifts and rewards to attract new customers and card usage.
In the survey, it becomes clear that these offers of benefits are not without any string attached. To be eligible for a welcome gift, applicants need to meet certain criteria.
In general, you must reach a certain amount of spending with the credit card within a certain period of time. And you must not be currently holding a credit card of the same type from the same company.
Further, should you decide to terminate the card within a period of time, say, between 12 and 24 months, you may be liable to a penalty fee.
Out of the 22 card issuers surveyed, 14 imposed a penalty/administration fee for early termination, ranging from $100 to $1,500 (in the case of a platinum card) - in most cases the fees are between $500 and $800.
As these terms and conditions are invariably in very small print in the contract agreement, the Consumer Council is concerned that consumers could easily overlook when applying for the service.
Another area of concern to the Council is with the quality of these welcome gifts. All of the credit card companies offering such gifts claimed that they would not be held responsible for any quality failure of the gifts.
The Council considers that card issuers have the responsibility to ensure that the products are generally safe and meets reasonable expectation of consumers. In the first six months of this year, it has received a total of 181 cases of consumer complaints against credit cards, of which 44 were in relation to welcome gifts and benefits.
Other than the promotional tactic of welcome gifts, credit card companies have in operation reward programmes to promote spending with credit cards.
It was found that 20 of the card issuers provided cash rebates varying from 0.3% to 1%, while 18 used reward point scheme for the exchange of gifts and others.
There are, however, restrictions with regard to the reward of cash rebates or reward points.
For instance, not all types of spending with credit card are entitled to earn cash rebate or reward points: 2 companies provided no award to any online spending and/or payment, while 7 gave no reward for monthly installment plan spending.
In some cases (4 companies), cash rebates are not strictly based according to the rebate rate. For example, a spending of $500 does not get $2.5 rebate (based on 0.5%) but only $2 as only multiples of $200 are used in the calculation.
Further, all reward points carry an expiration date. So if consumers did not take timely redemption action, the rewards will become automatically invalid.
Only 2 companies did actively notify consumers of the impending expiry of reward points; the rest simply specified the respective expiry dates on the monthly balance statement.
In the survey, it was also found the offer of what is called commonly a payment protection insurance plan. 9 out of the 22 credit card companies included the sales of such insurance plan as part of the package.
Cardholders should take note that once agreed to the insurance plan they are required to pay either a fixed monthly amount or a percentage of the outstanding balance of their credit card account - with no maturity date in sight.
In the survey, the 22 credit card companies were compared for their practice and levels of charges in respect of counter transaction fee, foreign currency transaction charge, over-limit charge, annual fee, and finance charge.
Consumers are urged to consult the survey findings in the use of credit card service.
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