Know your rights
If you exceed your credit card limit, you will be charged default interest. As a credit card account is a consumer credit contract, you are protected by the laws for consumer credit and borrowing money, including full disclosure of fees etc.
Read Understanding credit contracts to find out more.
You can apply to your bank or credit card company to reverse a charge on your credit card. This is called a credit card chargeback and includes any interest paid. Generally, the bank should grant a chargeback if your credit card was debited by mistake or fraud. Other reasons for obtaining a chargeback include the wrong products being delivered or non-delivery. Changing your mind about a purchase is not grounds for a chargeback.
You need to apply within a strict time limit from when you made the purchase, but you can still contact the bank or credit card company after this time limit. Check the terms of your credit card contract, which are displayed on their website.
When you transfer a credit card debt balance to a new bank, they pay off the debt from your old card. This allows you to take advantage of a lower interest rate offer, but often only for a set time before it increases. Other conditions to be aware of include:
- new purchases and cash advances are not part of the transferred balance and will attract a higher interest rate
- new spending on the card will not be paid off first, as it is standard for credit card payments to be allocated to the part of the debt with the lowest interest rate.
Read the Banking Ombudsman’s quick guide to credit card debt balance transfers(external link).
If you are having problems with your bank, ask the Banking Ombudsman to help.
Direct debits and automatic payments
Direct debits are a service provided to you by the bank and the bank must act on your instructions. This service is separate to any agreement that you have with the recipient.
With a direct debit, money may be taken out of your account even if there is not enough money in it. This could put you into overdraft, which you may be charged interest on, and/or pay a fee for. Direct debits are different to automatic payments, which won’t get paid if there isn’t enough money.
You may need to cancel a direct debit for different reasons, eg the debt is paid off or disputed, there has been fraud, or you’ve changed your budget. Your bank must act on these instructions. You don’t need the trader’s permission to cancel the direct debit, but you should let them know. If the trader sends the bank another form, you can instruct the bank, in writing, to decline all future direct debit requests from that trader.
If you lose money because of your bank’s failure to cancel a direct debit authority, you may be entitled to compensation. This could include a refund for overdraft fees or penalty interest or to credit funds debited without authority, unless you benefited in some way from the payments (eg your electricity bill was paid even though the direct debit was unauthorised).
Automatic payments don’t usually get paid if there isn’t enough money. The bank will usually try a few times to take the money out. If there’s not enough money, the bank may charge you a penalty fee. This information will be included in the bank’s terms and conditions.
A bank can only refuse to honour a cheque for these reasons:
- the cheque is over six months old
- there are insufficient funds
- the cheque has been reported lost or stolen
- the cheque is fraudulent.
If the bank dishonours a cheque when they shouldn’t have and you suffer loss as a result, you can claim compensation from the bank.
You can ask the other party’s bank to stop or cancel a cheque any time before they present it for payment. Banks will not stop a cheque simply if you change your mind about a purchase. But they will stop a cheque that has been lost, stolen, or if you suspect you have been defrauded.
See the Code of Banking Practice(external link) for more information.
Code of Banking Practice
The Code of Banking Practice is an industry code developed by the New Zealand Bankers Association (NZBA). The Code sets out minimum standards of good banking practice in New Zealand and a complaints procedure.
The NZBA has also developed a set of voluntary guidelines on how banks should assist and meet the needs of older and disabled customers(external link).