Need to know
- Retirees and semi-retirees tell CHOICE they've been denied access to credit cards they say they can afford.
- Lenders may be choosing to give credit to spenders more likely to run up interest.
- Advocates say banks and regulators should be more flexible and lend to seniors.
Australian retirees continue to face hurdles getting access to credit cards, and say banks don't understand their circumstances or are preferring to lend to more profitable customers.
CHOICE has heard from several retirees and semi-retirees who have been denied credit, despite having income and assets they deem high enough to cover repayments. They believe age discrimination could be at play.
But the complaints sit against a background of increasing regulation that's forced financial institutions to be more careful about who they give credit cards to, and to do away with unsolicited credit-limit increases designed to encourage people to spend more.
Blocked from credit cards, despite assets and income
Chris, a 71-year-old semi-retiree, says he "couldn't believe it" when the Commonwealth Bank of Australia (CBA) told him he didn't qualify for a credit card he'd applied for online.
The Sydney resident says he has "substantial" assets and income, including multiple properties. He says the mortgage on one of them is his only source of debt, which he says he has "ample income to cover".
The Sydney resident says he has 'substantial' assets and income, including multiple properties
Self-employed on a part-time basis, Chris was applying for either a Business Awards or Business Platinum Awards card with the bank, to keep business expenses related to his work in the legal sector separate from an existing personal card, also with CBA.
Despite being marketed as 'business cards', the liability on these products is personal and Chris says he had to provide information on his own income, assets and liabilities when applying.
Deemed 'unsafe'
When his online application was denied, Chris contacted CBA directly. The bank told him it would be "unsafe" for him to have more credit.
Chris suggested the bank could reduce the $54,000 limit on his existing CBA card by a certain amount and allocate the same amount to the new business card. The bank didn't take up the suggestion.
Chris says it was the first time ever he'd been denied credit
Chris says it was the first time in his "entire life" that he had been denied credit, and that he would have been happy with even the $500 minimum promised by one of the business cards.
"[But the bank] had formed the view that I had too much debt … and I should reduce [it]," Chris says. "Now, if one wants to be serious about that, what they would do is say: 'What we're going to have to do is actually reduce the level of debt on your existing card.' But they didn't say anything about that at all."
CHOICE has heard from several retirees who have been denied credit, despite having income and assets high enough to cover repayments.
Secondary cardholders struggle to build credit history
The credit landscape has changed in recent years with the growth of buy now, pay later platforms and debit cards that can be used on the Mastercard and Visa networks.
But Swinburne University professor Steve Worthington, who studies payments systems, says although use of credit cards may be declining, they're still proving popular.
One reason why someone may want a credit card over other forms of payment, he says, is because it can make it easier to get access to other credit products.
"It is a way of building a credit history for yourself … if you want to have future loans or, for example, a mortgage," he says. "So it helps to build your credit position, the fact you've had a credit card [and] held it for a while."
Although use of credit cards may be declining, they're still proving popular as a way to build credit history
That's what Queensland self-funded retiree Marilyn was trying to do when she applied for a credit card from ANZ.
The 72-year-old is looking to build up her own credit history after being the secondary cardholder on her husband's card for several years. She says she wants to avoid being left without credit if he dies before she does.
"I've seen a number of friends [in] my cohort of retirees who have been widowed," Marilyn explains. "Or, if their partner's health deteriorates, suddenly they don't have access to a credit card if they're the secondary cardholder."
'Ludicrous' decision
Marilyn says she'd had no trouble when she'd previously had a credit card of her own. Yet ANZ denied her application for a new card with a $6000 facility, claiming she didn't meet its lending criteria.
Like Chris, Marilyn believes she could have easily taken on the cost of having the card, and found the bank's decision similarly hard to understand.
"They weren't satisfied that I could meet the repayments on a credit card," she says. "If you've got substantial assets and you're applying for $6000, that's just ludicrous."
Lots of other retirees have shared similar experiences and sentiments in the CHOICE Community, saying they've been denied credit products they can afford.
Many have also spoken out about the lasting importance of having a credit card as a backup, especially when travelling overseas. For instance, some say their debit cards weren't accepted when they were trying to pay deposits on hire cars and hotel rooms.
Are banks just chasing profit?
So why are so many older Australians apparently getting cut off from credit? Worthington says it's possible that card providers are bypassing retirees in favour of giving credit to less scrupulous spenders.
He says there are two types of credit card customer – and one is more lucrative to card providers than the other.
The first type are 'revolvers', who repay only the minimum amount required on their balance each month. The second type are 'transactors', who pay off in full what they've spent within an interest-free period.
According to Worthington, card providers make most of their profit from the accrued interest that customers pay, meaning "the real money to be made is from the revolvers".
Worthington says it's possible that card providers are bypassing retirees in favour of giving credit to less scrupulous spenders
It's a theory that rings true for Chris, who says he pays off the balance owing on his existing credit card every month and rarely pays interest. He believes this pattern may have played a role in the bank denying him another card.
"[The bank's] own facts and figures tell them that I quite easily pay off a credit card with them," he says, "So the only thing I can think of, apart from age, is the fact that they're not making a dollar out of it, or enough dollars out of it."
Marilyn tells a similar story, saying she pays off in full the card on which she's a secondary holder almost every month, and rarely racks up interest.
Royal commission findings support this theory
In 2018, CHOICE reported on revelations from the banking royal commission that banks had, unprompted, stepped in to increase the credit card limits of customers who had lost control of their spending – a practice now outlawed.
Our other investigations have also uncovered the significant harm caused by long-term credit card debt and how those who accrue it end up paying the bank back much more than they'd originally spent.
All this evidence points to credit card providers' long-running trend of giving preference to more lucrative, interest-paying spenders as customers.
The banks respond
To follow up on the experiences of Chris and Marilyn, we contacted the relevant banks to ask them how they appraise credit card applications.
Commonwealth Bank of Australia (CBA)
In a statement, the CBA says it considers a number of factors when assessing credit card applications, including the applicant's ability to make repayments, their existing liabilities and repayment history. It didn't respond to a question about whether an applicant's age is a factor.
The bank also explains that although credit card customers may be allowed to continue to use their cards, changes to their circumstances such as employment and income can affect future card applications.
ANZ
Similarly, ANZ says it considers "the suitability of the product for the applicant, income, expenses and the ability to repay," and states that it follows regulations to look at the capacity of a credit-card applicant to make repayments – and not at their age.
Neither bank commented on whether an applicant paying off previous credit cards quickly or slowly affects their decision to grant them a card.
Banking association points to National Credit Act
The Australian Banking Association (ABA) represents many of the country's other big lenders. It says banks do take stock of an applicant's assets, and will lend to applicants of all ages.
A spokesperson tells CHOICE that banks are beholden in their lending to the National Credit Act, which essentially prevents lenders from giving consumers credit they cannot pay back.
The law, which was tightened in 2019, also requires lenders giving out credit cards to assess an applicant's request based on their ability to repay the limit on the card within three years.
The ABA advises credit card applicants who find their requests for a card denied to follow up with the institution to provide further proof of their financial status, or even go to a competing lender.
The ABA advises credit card applicants who are denied to follow up with the institution to provide further proof of their financial status.
Advocates call for greater flexibility for retirees
Ian Yates, chief executive of COTA (formerly Council on the Ageing), an advocacy group for seniors, says the denial of credit products to retirees who can afford them is a continuing issue.
He believes banks are turning away retirees because they're not enough of a "primary market", and are using responsible lending regulations as an excuse.
People in retirement usually have significant assets. It's not that they're at risk of going financially belly up
Ian Yates, seniors advocacy organisation COTA
Yates argues banks and regulators should be more "flexible" and take better stock of the financial situation of older Australians before refusing to grant them credit due to irregular incomes, such as dividends or occasional wages.
"People in retirement usually have significant assets," he says. "It's not that they're at risk of going financially belly up. It's just that they don't fit the income pattern of someone who's going to work and getting fortnightly pay."
Yates says COTA has previously worked with the ABA and formed a working group to discuss credit denial to seniors. This work was disrupted by the COVID-19 pandemic, but Yates says he'd like to see the forum reconvene and, if needed, involve the financial regulators to find ways to deliver this flexibility.
Retirees advised to plan ahead
National Seniors Australia is another advocacy group that often hears from senior members who've found themselves cut off from credit, though general manager Chris Grice says it's becoming less of an issue.
He puts this down to the work his organisation has done in educating members on the wider variety of payment options now being offered by financial institutions, such as debit payments on the Visa and Mastercard networks.
Grice also believes that banks sometimes get disproportionate blame for not giving retirees enough credit leeway, when they're operating under increased pressure from regulators.
It's certainly helpful if they had done a little bit of planning or they'd known in advance of reaching that cut-off point
Chris Grice, National Seniors Australia
"There's still the inflexibility, or what can be seen as inflexibility, as far as the consumer is concerned, but [what] to others could be seen as responsible lending," he says.
This is why it's been important, he adds, for his organisation to motivate seniors who want to get a credit card to do so before the 'crunch' that can come with looking for credit in retirement.
"It's like: 'Ah geez, I wish I had known,'" says Grice of the retirees who find themselves knocked back for credit.
"[We're not] advocating for people to get credit and live outside their means, but it's certainly helpful if they had done a little bit of planning or they'd known in advance of reaching that cut-off point."
Stock images: Getty, unless otherwise stated.
