NZ Herald 13 November 2010

AGosh, you’re observant. But what you’ve noticed is far from universal. When I asked the big banks how their policies worked, they weren’t just different for different banks, but often for different types of payments or accounts within a bank.

So this is more a guide than a comprehensive list. At least if everyone is aware of what their bank might do, they can inquire about it.

On your first point, in some situations, if a bank tries to debit money from your account and there isn’t enough there, the payment will “fail”. In other situations, the bank will try again later — to see if more money has come in.

Sometimes, though, a bank will make the payment even when there isn’t enough in the account. If your account goes into the red just briefly, most banks won’t charge fees or interest.

However, BNZ says, “Automatic payments are not checked for funds before processing, so if they overdraw an account the customer will be charged interest, and the automatic payment may be dishonoured the next business day.”

To avoid problems, says Kiwibank, “We always advise customers to set their payments to leave their accounts the day after credits are received.” Other banks echo that.

On your second point, I said to the banks, “Say you have a 180-day term deposit that matures on a Sunday. If the maturity date defaults to — or is switched to — the Friday before a weekend, do you get the same interest rate as on a full 180-day deposit?”

ANZ and ASB said they don’t adjust maturity dates that fall on non-business days — even though you might not get access to the money that day, as explained in this column two weeks ago. So of course the interest rate won’t change.

BNZ said it doesn’t automatically adjust the maturity date, but the customer could do so, and if they chose a 179-day term, they would get the interest rate for 150–179 days. “However, we do advertise these rates as ranges, so it is clear to the customer that they will get the rate that applies for 179 days, not 180 days.

Kiwibank’s default position is to extend the term to the following Monday, but a customer can choose the previous Friday. In either case, they get the 180-day rate.

National rolls a weekend maturity date forward to the next business day. The interest rate is unchanged.

At Westpac, if a customer sets up a term deposit online and the maturity falls on a weekend, the customer chooses an earlier or later maturity date. “If they choose the 181-day option they will get the six month rate, if they choose the 179-day option they will receive the five month rate. But the customer will be asked to accept the rate.”

Several banks — ANZ, ASB, Kiwibank and National — mail a confirmation letter soon after you set up a term deposit, listing the rate, term and maturity date. At ANZ, Kiwibank and National, you have a week from the start of the deposit to cancel or change the term or amount. Not so at ASB. “However, depending on the circumstances, we are always open to discussion,” says a spokesperson.

BNZ says it may change term deposits, “on a case by case basis. We do not have a specific timeframe written into policy regarding changes, but we do try to look after our customers.”

Westpac doesn’t send a letter, but “we do have a seven-day window to cancel or change,” says a spokesperson. “With online banking the customer is asked to accept the rate, and is given the option of accessing a PDF with their interest rate on it.”

The main message here: be aware that changing a maturity date by a few days can change your interest rate.

Moving on to your third point, sometimes there is no cut-off time for getting interest that day; sometimes it depends on the type of payment or account. Also relevant is whether the money is moving within a bank or to a different bank.

But who cares anyway? Even on $100,000, one day’s interest at 3 per cent after tax amounts to about $8.

While I was at it, I asked the banks a related question: If you make an online payment, does it need to be before a certain time for that money to go to the payee by midnight on that date?

Once again, answers varied. The earliest cutoff times for each bank are: ANZ 10.30 pm, ASB 9.30 pm, BNZ 11.45 pm, Kiwibank 10 pm, National 8 pm, Westpac 10 pm. In some cases, there are earlier times for credit card payments.

I have a particular interest in this, as I recently made a GST payment online close to midnight on the deadline day. Soon after, Inland Revenue wrote that my payment was a day late, and charged me a couple of dollars interest. Mercifully, they then wrote it off as being too small to bother with. But I won’t do that again. I felt like I had been told to sit in the corner for half an hour.

AIt seems you asked the wrong Westpac branch. “We offer safe deposit boxes at our Safe Deposit Centre at Queen St, Auckland,” says a spokesperson.

You’re right about the other banks, though. ANZ, ASB, BNZ, Kiwibank and National all said they don’t — or no longer — offer this service. Says a spokesperson for ANZ and National, “We have recently made the decision not to accept any new lodgments.”

AWell put. If you’re buying gold for its beauty, it certainly has something over pork bellies. But if it’s just about what happens to its value, then a diversified portfolio of commodities would be considerably less risky.

“Regression to the mean” will sound horribly complicated to some readers. And strictly speaking, says a statistician friend, the term shouldn’t be applied to long-term price trends. But that’s rather technical, and gets in the way of your message — which is a good one.

If you look at a series of prices over time, they fluctuate around their long-term trend line. If the current price is higher than the trend, chances are generally more than 50:50 that the next price will be lower — as it regresses, or goes back, towards the trend line. If a price is lower than the trend, the chances are that the next price will be higher — again moving back towards the trend.

I don’t agree that investments always regress to the rate of inflation. Share and property prices, for instance, tend to grow faster than inflation. But they certainly tend to stay within cooey of inflation over the long term.

Your main point seems to be that, given the gold price is now well above its average over recent decades, it’s more likely to fall than to rise in the near future.

Note, though, that I said only “more likely”. Gold might well rise further for a while. Regression to the mean can take a long time. Hedging my bets? You betcha! But I would hate to see anyone count on further gold price rises.