Stanchart Platinum Access Card

Be careful and read the fine print when using financial tools such as credit cards. Below is a warning about the new product that Standard Chartered has pushed out lately, Platinum Access card.

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Beware of the high interest rates and extra costs when you live on credit

Recently, Stanchart launched its new Platinum Access card aimed at young working professionals in Singapore.

This allows the cardholders to spread the cost of their purchases above $100 over two years or more.

This is worrisome from two perspectives. Firstly, it is clearly encouraging the young professionals to live beyond their means. This is contrary to sound financial planning that the government advocates for all Singaporeans.

Secondly, the true cost of using the service is not fully revealed.

This will mislead many who will end up with heavy debts.

Firstly, the 5% per annum rate that is charged on the amount of purchases is not clearly highlighted as a flat rate basis.

The bank, however, did mention that the effective rate would work out to be 9.32% p.a.

Credit cardholders must also realise that there is a 6% administrative fee chargeable immediately. This will raise the effective rate to close to 16% p.a.

Under the present system, cardholders can decide not to roll over the balance if their cash flow allows them to do so. The 24% p.a. interest will then cease to be chargeable.

As for the Stanchart's new Platinum Access card, the 16% p.a. effective interest rate is already charged for 24 months.

An administrative charge of $50 will also be levied if the cardholders cancel the payment of instalments when they repay the full amount owed for a purchase.

This will rocket the effective interest rate way beyond 24% especially for purchases of relatively small amount. This means that you are effectively locked in for the full period and remain indebted to the bank even when you have the liquidity to free yourself from the debt.

Cardholders must also realise that if the repayment period is shortened, the administrative fee of 6% and the 5% p.a. flat interest charged for the entire 24 months will cause the effective rate to increase even further.

For example, let's assume the purchase is for $1,000. The administrative fee payable is $60 and the interest chargeable for the two years will be $100 (ie. 5% p.a. for two years on $1,000).

The monthly instalment is calculated at $1,100/24 = $45.83. If you decide to repay fully after one year, the remaining aggregate instalment to repay will be $550 plus the administrative fee of $50.

To calculate the effective interest for the financing of the purchase, the following are the critical numbers:

Present value = $940 (This represents the net amount that the bank actually finances after netting off the administrative fee of $60).

Payment per month = $45.83 (monthly instalment)

Number of instalment paid : 12

Amount to pay at the end of 12 months to repay fully: $600

The effective interest rate works out to be 26.5% p.a.

If the amount of purchase is $500, the effective interest rate will work out to be 31.9% p.a.

This is certainly not an attractive product for our young professionals.

Dr Johnny Tan Hung Ming
Source: ST Forum

AIA CARDWIZE

Identity theft is a growing problem and that problem gets more acute when much more of our transactions today are done cashlessly using credit cards.

AIA has this product named AIA CARDWIZE that is marketed as "keeping your identity safe and secured". The strength of CARDWIZE is that it softens, notice not eliminate, the blow of dealing with identity theft and related losses, covering against additional costs related to the loss, theft or damage of the residence and car keys, and items purchased using credit card.

At first look, this appears to be a good product. I had lost my belongings to theft before and while I did not lose much valuables, I ended up spending a bigger sum replacing my identification documents, locks and much time to conduct these administrative procedures. Such a product would have greatly cushioned the impact of that incident.

What exactly does the product offer?
Identity Theft ($10, 000)
Expenses incurred from resolving identity theft up to 12 months after a claim:

• Legal Expenses
• Lost Wages
• Loss from unauthorised account and payment to creditors

Fraudulent Charges ($5, 000)
Unauthorised charges that policyholder is responsible for on lost of stolen payment card, up to 12 hours prior to first reporting the event to payment card issuer(s).

ATM Assault and Robbery ($2, 000)

1. ATM Robbery - reimbursement for money withdrawn from any ATM around the world using payment card against a robbery that occurs within 15 minutes of the withdrawal.
2. Bodily Injury - reimbursement for reasonable emergency first aid charges for bodily injury incurred during covered ATM robbery.

Lost Wallet Coverage ($2, 000)

1. Replacement costs for a lost or stolen wallet and any payment cards and personal papers in it.
2. Application fees for replacement personal papers and/or payment cards.

Payment Card Purchase Protection ($5, 000)
Loss arising from items purchased entirely with payment card which were lost, stolen or accidentally damaged.

Keys Replacement Coverage ($2, 000)

1. Key Replacement - cost of replacing the keys of residence or vehicle if lost or stolen.
2. Break-in Replacement - cost of replacing your locks if your residence or vehicle is broken into.
3. Lock Out Reimbursement - cost of obtaining a locksmith if locked out of residence or vehicle due to loss or theft of keys.
4. Rental Car Reimbursement - cost of a rental car if vehicle keys are lost or stolen and cannot be replaced within 24 hours.

These policy benefits further come with the following notes:

• Policy will only cover amount not covered by other similar insurance policy, up to coverage limits specified.
• An excess of $100 applies per occurrence/claim.

There is a further special feature that I especially like. By registering existing financial accounts during signup, reporting the loss via a hotline can initiate the blocking of access to all financial accounts.

At a monthly premium of $58, is this product a good deal? Unless you are the type who frequently loses your belongings, it is not something worth considering.

No one pays annual subscriptions for credit cards these days. When the subscription is due, a call to the customer hotline usually is good enough to get the fees waived. When we are effectively paying nothing for our cards, does it make sense to pay to use it?

But isn't the coverage addressing important aspects such as identity theft, fraud, loss, etc? In all my years, I have only lost my wallet twice. Once when I was very young and once when I started working. Such a frequency of loss does not warrant a need for this protection. $58 per year and there is excess of $100 imposed! Even without losing my wallet, I will have made a loss purchasing this product.

But what about identity theft? It is indeed a growing problem but not one that has gone out of control locally. The policy gives up to 12 months after a claim but should identity theft occur, it could take much longer to resolve.

Based on my present lifestyle and risk profile, I do not think that this is a product worth buying. If you are the type who loses your stuff and loses it big time, then this product will be right for you. Remember to factor in the $100 excess and the annual premium of $58... Will you ever lose that much in a year to theft, etc?

The Origins of Financial Reviews

I started this blog (http://financialreviews.blogspot.com) after many friends had seeked my advice on financial matters/products. Somehow, they liked my views because I am not a financial planner/advisor but had gained whatever knowledge I shared with them by taking a keen interest in managing my money.

Personally, I subscribe to the view that regardless of whether you have a personal financial adviser or not, it is important to play an active role in managing your money. We cannot shirk responsibility for our own financial health and expect others to take care of us, take care of our money.

Since I never really got anything except goodwill in return for all the feedback that I had given to my friends, I hope that putting up my views online and adding in some advertising will bring me a little additional income eventually.

Do drop me a comment if there is some product that you will like me to take a look at and I will try to blog my views on it for you.