How to Calculate Interest Rate on Credit Cards

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					            RESERVE BANK OF NEW ZEALAND
                                          Credit Card Survey

                                                     August-2000
                       The contents of individual returns will be treated as confidential.

E-mail                     statsunit@rbnz.govt.nz
Fax                        04 471-3722


Reserve Bank contacts:
Clive Thorp                Senior Adviser                            04 471-3652
Neil Humphries             Manager, Data Unit                        04 471-3602
Bun Ung                    Senior Research Officer                   04 471-3724
Monica Shin                Statistics Officer                        04 471-3935




  Company Title :

                           Primary Contact                           Nominated Senior Executive
             Name :
              Title:
         Telephone:
            E-mail:
               Fax:



Respondents to the Credit Card Survey

American Express
ANZ Banking Group (NZ) Ltd
ASB Bank Limited
Bank of New Zealand
The National Bank of New Zealand Limited (including Diners Club (NZ) Limited)
TSB Bank Limited
Westpac Banking Corporation, New Zealand Branch




                                                                                                  dennis

                                                                                                  f

Dennis
CREDIT CARD                                                               Enter new data here




                                                              Reference month     Aug-2000           Jul-2000           Jun-2000

                                                                                Please use the format 00.00, eg, 18.75
1   Classic card customer interest rate as at end of month

                                                                                Round numbers to nearest 0.0m, eg, 231.2
                                                                                   $M               $M                $M
2   Total credit balances (gross) as at end of month

3   Billings for the month (includes cash advances)
       Cards issued in New Zealand
           3.1 Total billings in New Zealand

           3.2 Overseas billings

       Cards issued overseas
          3.3 Billings acquired in NZ on cards issued overseas


           3.4 Total monthly billings ( 3.1, 3.2 and 3.3)                                0.0              0.0                0.0

4   Total credit limits as at month end

5   Excesses and overdue/default amounts at month end
          5.1 Excesses (as reported prior to June 2000)
          5.2 Overdue/default (30 days or more past due)

6   Total advances outstanding (gross) as at month end


Daily averages for month (lagged one month)


                                                         Previous month            Jul-2000         Jun-2000            May-2000
7   Personal borrowing on major cards, daily average
          7.1 Personal interest-bearing advances outstanding (gross)
          7.2 Personal non-interest-bearing adv outstanding (gross)
          7.3 Personal total advances outstanding (gross)                                0.0              0.0                0.0

    Memo item: where relevant, show total co-branded and
    affiliate cards included in 7.3 above here (please refer to Help
    after 7.3 for formula for splitting this total between 7.1 and 7.2)

    Business borrowing
          7.4 Total business advances outstanding (gross)

    Total daily average outstandings on all cards (gross)
           7.5 Interest-bearing advances outstanding (gross)                             0.0              0.0                0.0
           7.6 Non-interest-bearing advances outstanding (gross)                         0.0              0.0                0.0
           7.7 Total advances outstanding (gross)                                        0.0              0.0                0.0

8   Weighted average interest rates and classic card rate                       Please use the format 0.00, eg, 18.75
          8.1 Personal card weighted average interest rate on
              interest-bearing advances (ie. on 7.1 "ex-affiliate")
          8.2 Personal card weighted average interest rate on
              total outstanding advances (ie. on 7.3 "ex-affiliate")
                                                                                Round numbers to nearest 0.0m, eg, 231.2
           8.3 Personal card average daily balance used
               to calculate 8.1 above (ie, "ex-affiliate")
           8.4 Personal card average daily balance of
               total outstanding advances in category 8.2
                                              Balances as
  Please add extra rows as needed.                 at
                                               6/30/2000
                                                                                Customer
                                                                             rate at end of       If rate
                                                                Customer        previous       changed in
                                                              rate at end of     month          previous           Current fee
    Personal cards in weighted average                          referrence (include tier       month, date          on a per
              rate calculation                (Once a year)       month       information)     of change*         annum basis
  [RB example] Visa basic ('classic card')            126.3         17.50%         18.25%      14-Jun-2000                  $25




  Total                                                   0
All personal cards not in weighted average rate calculation                       *If no date is entered, a warning will
(affiliate and co-branded, less than 5%)                                          appear to the right if rates in reference and
                                                                                  previous months are different.




  Total                                                   0
  Please list business cards here.




  Total                                                   0

  Total Outstandings                                      0




  Signoff
  I have completed this return according to the
  guidelines agreed with the Reserve Bank and have
  reviewed the interest rate information on this sheet.                                       Is the 'Contacts'
                                                                                              page up to date?

  Name:
  Clive Thorp

  Date:
  21-Mar-01




                                                                                                                                  836fa1db-fb0e-475e-a93d-80899a17a963.xls
Rates & Fees|Signoff                                                                                                                                             11/8/2010
HELP
Credit card monthly survey completion requirements as from June 2000
Data to be provided in this return

Procedural Issues
Data for cards branded as Visa, Mastercard, Diners and AMEX are required in this return. Co -branded and affiliate cards, provided they
have one of these brands, must be included in totals where specified below. Do not include totals for any other cards.

Reference month
„Reference month‟ is the term used internationally to mean the month for which data are being reported. It is the month to w hich data
„reference‟ is being made.

Due date for the return.
The return is due by close of business on the tenth working day following the last calendar day of the reference month. It sh ould be e-
mailed to the address shown on the cover sheet of this template. If an issuer perceives likely difficulties in meeting this deadline (for
example as a result of problems with relevant reports) we expect to be advised of this as soon as possible. We have an advan ce release
calendar posted on the Bank‟s website with expected release dates for credit card data, and may need to advise users of a del ay in
extreme cases.
All „as at‟ data are to be recorded at the close of the last business day of the reference month („as at month end‟, on the i nput worksheet).
Month end is to be regarded as the last day for which „as at‟ data are available from electronic or printed reports. The dat e the report is
printed is not relevant – what is relevant is the date at which the data apply, ie, the „as at‟ date. Consider the example of a public holiday
or Saturday or Sunday being the last calendar day of a month – Sunday was for April 2000. If no reports were printed with data totals ‟as
at‟ Sunday 30 April, but one was created „as at‟ Monday, 1 May, then the last business day of the month was the 28 April. I f a report
was printed on Monday that captured data with a reference date (ie, „as at‟) Sunday 30 April, then that is the last business day of the
month.
Data for interest-bearing and non-interest bearing advances categories, and for the computation of weighted average interest rat es, are
to be daily averages for the month.

Cover sheet
Please ensure the coversheet has relevant names and contacts. The senior nominated executive should be a person who is
accountable for the completion of the form. This person‟s responsibilities must include the ability to ensure there is backu p for the
primary contact person who usually completes the return. The nominated senior executive is the person we will contact in the event the
primary contact person is unavailable, or where there are issues this person is unable to resolve.
Please do not „unprotect‟ the Excel spreadsheet and modify formulae. If you have a problem with the worksheet, please contac t the
Bank for a solution. It is important that formulae embedded in the worksheet continue to operate, or the overall aggregation operation will
not proceed.


Definitions of required data

1. Classic card customer interest rate as at end of month.
This interest rate is the one charged customers on your standard, or „classic‟ card. It is likely that this card will be the one with the largest
outstandings, or almost certainly, it will have the highest billings figures. This rate has been published since 1981, weigh ted by total
outstandings. From June 2000 the aggregate for this rate will be disseminated as a simple average of classic card rates, bac kdated
using original data. This monthly rate will be compared with the classic card entry in the worksheet labelled „Rates and Fee s/Signoff‟.
Please enter your classic card as the first one on the sign -off worksheet. Issuers may have both a Visa and Mastercard „classic ‟ card for
which the „classic‟ rate is identical – please just list them one after the other, with the higher volume one first.

2 Total credit balances (gross) as at month end
Most issuers enable customers to supply funds to their credit card accounts, leaving them in credit to the customer. The dat a entered
here should be the total of customer credit balances (deposit balances „in‟ card accounts) as at the last day of the month.

3 Billings for the month (includes cash advances)
„Billings‟ include cash advances, and are for all cards, business and personal. „Billings‟ means the monthly flow of total c ard debits
(excluding interest), either by direct purchase or via cash advances.

Cards issued in New Zealand
3.1 Total billings in New Zealand
Billings acquired in New Zealand on all cards issued in New Zealand. Cash advances are included.

3.2 Overseas billings
Overseas billings are billings of New Zealand issued cards acquired overseas, where the billings definition includes cash adv ances.

Cards issued overseas
3.3 Billings acquired in New Zealand on cards issued overseas
These billings broadly represent the spending of non-resident visitors and business people in New Zealand.

3.4 Total monthly billings
This is the total of 3.1, 3.2 and 3.3. It is calculated automatically by the template. The total is computed as a check for issuers to use
against their internal „total‟ reports.

4. Total credit limits as at month end
Total customer credit limits (on all cards, no matter their status). These limits are to have the usual industry meaning. A credit limit is
authorised by the issuer for total credit that a customer may have outstanding on a card without being in breach of the agree ment with
the issuer.

5. Excesses and overdue/default amounts as at month end
5.1 Excesses (as reported prior to June 2000)
Excesses are “the amount by which outstanding debit balances exceed the agreed limits for all „good‟ accounts”. The majority of
respondents have a „good‟ account file that tabulates limits, excluding overdue and default cards, or in some cases, default only. Reports
respondents have a „good‟ account file that tabulates limits, excluding overdue and default cards, or in some cases, default only. Reports
used prior to June 2000 should continue to be used to provide these data. It is not for publication.

5.2 Overdue/default
Whether or not a customer is overlimit, issuers obtain reports of aggregate amounts of overdue balances. We want to collect overdue
totals (ie, all the outstanding balances on a card/cards, not just the amount that triggers the „overdue‟) that are ‟30 days past due‟. Thes e
data are not for publication.

6. Total advances outstanding (gross) as at month end
This entry is total advances outstanding as at the end of the reference month.

Daily averages for the month, lagged one month.

The data required for items 7 and 8 are entered in the same column as for items 1 to 6, but the data must apply to the month preceding
the reference month. A reminder of the month to which these data apply is provided in the column immediately above these items. All
dollar values are daily averages for the month.

7. Personal borrowing on major cards, daily average
7.1 Personal interest-bearing advances outstanding (gross)
(See 7.4 below for the definition of business cards: do not include them here.)
The definition of interest-bearing advances outstanding is critical. Interest-bearing advances outstanding is the amount of credit
outstanding that has interest being charged to the customer. It must be calculated to exclude credit outstanding that subseq uently
proved in the reference month to have been paid in full, therefore not attracting an interest charge in terms of any „interes t-free‟ period
agreed with customers. The meaning we want is „adding up each customer with credit outstanding, what is the total on which t hose
customers are collectively paying interest, excluding any float carried for the month‟.
The data in this item are lagged one month because it is not possible to calculate interest -bearing advances for the reference month.
Using the formula illustrated in the „RB weighted rate example‟ worksheet, this can be done as a close approximation for the previous
month. Therefore, entries for items 7.1 to 7.7 are daily averages of outstanding advances for the previous month – that is, the month
prior to the reference month. In the case of your company, we have agreed a means of arriving at the interest -bearing advances
outstanding figure, which must be recorded in the issuer procedures worksheet you have created as part of this template. Ple ase refer to
this when completing item 7.
For general guidance, this template contains a worksheet („RB weighted rate example‟) showing a way in which both the interes t-bearing
advances outstanding figure can in some cases be computed, and the way in which a weighted average interest rate may be calcu lated
for several cards. The workings in this worksheet may not correspond to the way we have agreed with you that your calculatio ns will be
made, but the example illustrates the concepts we want and a way to calculate them for some issuers. The actual calculations used by
you should be entered in your „issuer procedures‟ worksheet. This will remain confidential, as will all data provided.

7.2 Personal non-interest-bearing advances outstanding (gross)
This proportion of advances outstanding is the „free float‟ that earns issuers no interest in terms of the „free credit days‟ offered customers
under the terms of many credit card products. Most issuers will obtain both 7.1 and 7.2 from the procedure illustrated in th e „RB
weighted rate example‟ worksheet.

7.3 Personal total advances outstanding (gross).
This is the total of 7.1 and 7.2, and includes co-branded and affiliate card totals where relevant. See memo item note below.

Memo item
To minimise the burden associated with calculation procedures, we have agreed that it will not be necessary to calculate weig hted
average interest rates in item 8 below for co-branded and affiliate personal cards, where the total is no more than 5% of daily average
advances outstanding. It will be necessary however to include them, apportioned as interest - and non-interest bearing, in 7.1 and 7.2.
Issuers who choose not to calculate a weighted average interest rate for affiliate and co -branded cards are required to apportion the total
daily average of advances outstanding on these cards in the same ratio as derived for major cards included in the weighted av erage
interest rate calculation. Such issuers are requested to contact the Bank to confirm the procedure used to apportion the tot al balance of
these cards between „interest-bearing‟ and „non-interest-bearing‟.
We have requested the total of co-branded and affiliate cards as a memo item to enable us to monitor their proportion of the mar ket - we
will not publish these data.

7.4 Total business card advances outstanding (gross).
The definition of a business card is:
“Business cards are cards marketed as „company cards‟, with special features for companies that assist with employee record k eeping”.
Business cards have relatively small outstandings, and do not tend to earn significant interest amounts, as businesses tend t o pay off the
full balance on due date. Therefore, business advances outstanding are treated as „non -interest-bearing‟ for the purposes of the
Reserve Bank‟s output reports. They are added automatically to item 7.6 by a formula in the return.

Total daily average outstandings on all cards (gross).
7.5 Interest-bearing advances outstanding (gross).
This equals 7.1 and the template carries this number down automatically.

7.6 Total non-interest-bearing daily average advances outstanding (gross).
This total is the sum of 7.2 and 7.4. The template automatically adds these data.

7.7 Total advances outstanding (gross)
This is the sum of 7.5 and 7.6. The template automatically adds these data.

8. Weighted average interest rates
The weighted average interest rate computed can only be an approximation, given the way in which credit cards operate. At th e time of
assessment of credit outstanding at the end of a month, issuers do not yet know how much of a balance will be repaid, and as yet have
recorded only the interest that has accrued on the previous month‟s balance. For that reason, the weighted average interest rate
calculation recorded here will use as a denominator the average daily balances for the preceding month, against the numerator of
interest received in the current month. The use of an average daily balance and a „days of the year‟ annualisation procedure is intended
to make the approximation as close as possible. Above all, the Reserve Bank is interested in the trend in interest rates, an d a consistent
application of the procedures agreed with you will help provide good trend information.
application of the procedures agreed with you will help provide good trend information.
Each individual issuer has to calculate the interest-bearing/non-interest-bearing split in outstanding balances for each card. For each
card‟s daily average balance of interest-bearing advances for the month preceding the reference month, there will be a matching interest
revenue figure for the reference month. The issuer must weight the results from all its qualifying personal cards by a simp le products
calculation of total daily average balances in a denominator. This is matched against the total of interest revenue in a num erator, to
arrive at an annual weighted interest rate figure. Allowance must be made for the correct number of days‟ interest, as a fra ction of 365
(for example 30/365) from the month preceding the reference month, against which the reference month‟s interest accrued total is set as
a numerator. This fraction is critical and issuers are requested to take great care in ensuring that the $ value of interest
received in the numerator is allocated to the correct number of days over which it was earned . It is not the calendar days in a
month that are important here, but the actual number of days‟ interest received, converted to an accurate annual fraction. S ee the „RB
weighted rate example‟ tab for the logic of the above, shown with worked examples.

8.1 Personal card weighted average interest rate on interest-bearing advances
The method of calculating the weighted average interest rate on interest -bearing advances outstanding will vary from issuer to issuer,
and the specific calculation method being used by you should be recorded in your issuer procedures worksheet in this template . The
weighted rate calculated applies to all major personal credit cards. It excludes business cards, and may, at the decision of each issuer,
exclude co-branded and affiliate personal cards provided the value of advances outstanding in this category does not exceed 5% o f the
issuer‟s total daily average for personal cards of all types.
The interest rate provided in 8.1 relates to the major (non-co-branded) personal cards included in 7.1. For calculation methodo logy, refer
to your issuer procedures in this template, the RB weighted rate example tab (cell I32) and the general guidelines in 7 above and this
item 8. NOTE: If the customer interest rate changed in the month preceding the reference month, care should be taken with agreed
calculation methods to ensure that the two rates operating during the month impact appropriately on the weighted interest rat e
calculation. Please refer to the „RB weighted rate example‟ worksheet, line 35, for the method to use in this case.

8.2 Personal card weighted average interest rate on total outstanding advances
The interest rate inserted here is the equivalent of cell J33 in the RB weighted rate example in this worksheet. It may be called the
„effective‟ rate, as it takes into account all the borrowing on the card, whether it is at interest or not. This rate will b e lower than 8.1.

8.3 Personal card average daily balance used to calculate 8.1 (ie, interest -bearing only)
This average daily balance figure (nb, excluding co-branded cards) is used to weight the results from all issuers. It is the eq uivalent of
cell G29 in the RB weighted rate example tab.

8.4 Personal card average daily balance of total outstanding advances in category 8.2
Again, this figure (excluding co-branded cards) is required to calculate the weighted average effective interest rate for all is suers, and is
the equivalent of cell D27 in the RB weighted rate example tab.

Worksheet: ‘Rates and fees/sign-off’
This worksheet contains three sections: for personal cards included in the weighted average interest rate calculations in 8; for personal
affiliate and co-branded cards not included in 8,and business cards in 7.4.

We ask for this information to assist with comprehension of the total market. To limit the reporting burden, we ask for „as at‟ outstanding
balances only once a year in June. For major personal cards only, we request that you review and revise information on interest rates
and fees monthly. We need this interest rate information to assist with variance checks on the weighted average rate calcula tions.
Classic card rate request repeated from 1 on input worksheet. Please enter your classic card as the first one on this tab. We
appreciate you may have both a Visa and Mastercard „classic‟ card for which you keep the „classic‟ rate identical – please just list them
one after the other, with the higher volume one first.
Customer rate as at end of reference and previous month
Please note that it is important to know what date interest rate changes were implemented to affect the interest received on each card, as
part of a check on results from procedures to calculate interest -earning balances outstanding (see RB weighed rate example tab, line 35
on). This applies mainly where the methodology in the RB weighted rate example tab is used to distinguish interest -bearing from non-
interest-bearing balances. If the column showing the customer rate at the end of the reference month has a different rate from the
previous month and there is no date entry in the „rate change‟ column, a warning message will appear at the end of that row.

Sign-off
While an „electronic signature‟ is not requested, we include a declaration to emphasise that this data is important, and to g ive you
confidence that we regard it so. A warning message will appear to remind you that a name and date must be entered before clo sing the
workbook.

end
Example of logic of 'interest-bearing/non-interest-bearing' split calculation and weighted average rate

Cards                                                  Interest Rate
Card One                                                     18.50%

Card Two                                                     13.50%
Weighted rate calculation

           STEPS to take below
           1. Enter in C the correct customer rate for the month of June.
           2. Enter in D the daily average balance for each card type
           3. Enter in F the interest received in July. Every other column has a formula in it, which drives the answers.
                                                C              D               F         G             H              I            J                 K
                                                                                      Portion                   Products of  Products of       Percentage
                                           Customer          Total         Interest  actually "Effective" C & G to get D & H to get           of total that is
                                            interest       daily av          rec'd   charged        yield on      wt'd rate   weighted       bearing interest
                                          rate in June Jun balance          in July  interest     each card     on int-earn effective rate
                                                %             $m              $m        $m             %                                            %

Card One                                       18.5%             300            3.5    230.18        14.2%           42.58          42.58               76.7%

Card Two                                     13.5%              25       0.25            22.53       12.2%            3.04           3.04               90.1%
Total 7.3 (and 8.4)                                           325
Business card                                                   12
Add relevant columns for interest calcs                       325        3.75            252.7                       45.63          45.63               77.8%
Total (7.7)                                                   337
Total (6) as at month end
Weighted average rate on personal interest-bearing portion, for 8.1, is:                                           18.05%
Weighted av 'effective rate of interest on personal cards, for 8.2, is:                                                           14.04%

				
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