Signs of interest competition amongst credit card providers
The latest Consumer Council survey has shown welcome signs of the emergence of credit cards which offer substantially lower interest rates to the consumers.
In an apparent bid to capture a share of the highly lucrative credit card market, some operators have recently introduced interest rates as low as 13.8% to 17.8% per annum.
This is in sharp contrast to the vast majority of credit cards still charging interest rates of 30% per annum or more, despite the prevailing low interest environment.
The lower interest rates have brought credit card debts closely comparable to those of personal instalment loans by banks and lending institutions.
However, credit cards with lower interest rates are not without strings attached. In the event the cardholders are behind in minimum monthly payments, they stand to be charged a considerably higher interest rate (of up to 36%). Some offer introductory lower interest rates (as low as 7.536% p.a.) for only the first few months.
With most credit card interest rates still set at a high level, consumers are urged to make every effort to use credit cards prudently to avoid sinking into prolonged debts - or even bankruptcy as many have been through these days.
For instance, if you owe $50,000 and repay only the minimum (i.e. 5% of the outstanding balance) each month, it will take you a total of 15 years to repay the full debt, and on the basis of an interest rate of 30% per annum, you would have paid $49,400 in interest cost.
Consumers should clearly realise that credit cards are great convenience in retail purchases, but once a cardholder is in debt (by not repaying the full amount of balance on time), interest will be charged immediately on all new purchases from their very dates of transaction.
In other words, with rare exceptions, there will be no interest-free period as many card users tend to wrongly assume.
The cost of using credit cards for cash advances is even more prohibitive. Besides the higher interest rates than those for retail purchases, in some cases, cash advance service charges also a handling fee of 2.5% to 5% of the advance amount plus a fixed charge of $10 to $70.
As interest is accrued on a daily basis, consumers will do well to repay the amount owed, in part or in full, as early as possible and not until the payment due date. Otherwise, if you miss the due date, in addition to the interest, it may incur late charge as penalty - and the possibility of having your interest rate revised upwards.
A favourite marketing tactic of credit cards these days is the offer of lower interest balance transfer programme.
Consumers, however, should bear in mind the consequence of using the same card to sign for retail purchase or draw cash advance without settling fully the total outstanding balance (the balance transfer sum plus any retail purchase or cash advance).
In such case, the practice of the credit card providers is to use whatever sum of repayment to cover, first, what outstanding fees, interest and the amount owed for the low-interest balance transfer, before retail purchase or cash advance, which entail a higher interest rate.
The Council's survey covered comprehensively a total of 26 providers of credit and charge cards in Hong Kong, comparing them for their variations in interest rates and charging methods.(" Table of CreditCard Rates ")
Results of the survey which are vital to assessing the cost of credit to hard-pressed consumers, were published in this (February) issue of CHOICE, as part of a series to arouse consumer awareness and understanding of this issue at a time of financial hardship.
Test shows energy saving devices to be dud
Traders are marketing an electrical gadget which they claim or imply can save energy and cut down domestic electricity bills.
The Consumer Council has found at least three of such so-called energy saving devices available in the marketplace, priced from some $600 to $1,200, and put them to laboratory test.
The sellers of these devices have made lavish claims of the effectiveness of their products. In one case, it claimed to be able to reduce electricity consumption by up to over 30%.
Other claims include protecting and prolonging the life of appliances, stabilizing the electricity supply and protecting the environment.
Purportedly, these devices are especially effective when used (by simply connecting it to a mains outlet) with motor-operated appliances such as air-conditioners, refrigerators, pumps, and fluorescent lights, too.
As a tactic to induce sales, some of these devices even undertake to provide refund upon proof that their electricity saving claims fail tomaterialise.
The Council's test, however, found none of these devices were able to reduce the active electrical energy consumption of household appliances.
In other words, there can be no savings in electricity bills for household users as power companies measure only the consumption of active electrical energy.
The test showed that not only are these devices totally ineffective to cut down electricity bills, they may actually incur additional consumption though of a very slight quantity.
Further, minor deviations from the safety standard were observed, namely, insufficient marking and power supply cord strain relief, inadequate fixing of internal wiring, and plastic material requiring improvement.
Consumers intent on electricity savings are advised to choose and use appliances of better energy efficiency, and follow certain simple guidelines:
- use compact fluorescent lamps instead of incandescent light bulbs;
- switch off or unplug appliances not in use or in standby mode for a long time;
- use curtain to screen off direct sunlight into air-conditioned room; and if windows can be used for ventilation, close the exhaust air vent of air-conditioner to reduce the leakage of cooled air.
Advice on choosing health screening packages
Does the Year of the Horse spell health or otherwise for you?
To find out the state of your health, you have a bewildering choice of at least 62 health care packages offered by 12 private hospitals with prices ranging from $350 to $9,570.
In the survey, the Consumer Council has found a myriad of health screening packages that cover from only the most basic to the most thorough of physical examination of your health. Highlights of the survey include:
- from $450 (4 check items) to $9,570 (more than 50 items) in 29 packages for women. The most common item of female examination is "Pap smear" while others such as "mammogram" and "ultrasound breast" are more likely to be found in the more expensive packages.
- from 1,700 (13 check items) to $9,570 (more than 50 items) in 11 packages for men. Commonly included in male assessment is "prostate specific antigen".
- from $350 (4 check items) to $6,800 (35 items) in 22 basic/complete packages for both genders. All these packages include "complete physical examination", "complete blood count", "x-ray chest examination" and "urine routine examination".
Consumers should take note that even under the same scheme, some hospitals offer different assessments and different charges, for different age groups of people.
For instance, in one package, one hospital would offer at $7,200 "mammogram" and "bone mineral density scanning" for female aged 46 or over; whereas it would offer at $6,600 "ultrasound breast" instead for female aged between 20 to 45. One hospital would offer a 50% discount on its basic health care package to female aged over 50.
Once a plan is selected, some hospitals are reluctant to reduce fee even if you wish to opt out of certain test items. Further, additional charges are needed for any health assessment to be made by a specialist upon request.
Consumers are advised that it is not necessarily a case of the more the better when it comes to choosing a health screening package.
Consumers should consult physicians for what specific tests or examinations they need to take and, if necessary, the frequency, in having health check.
First joint test gives milk products a clean bill of health
Good news for the regular milk drinkers.
They can set their heart at ease and imbibe their favourite milk product free of the worry of contamination of veterinary drug residues.
In the first joint project between the Consumer Council and the Food and Environmental Hygiene Department (FEHD) on food products, 30 samples of milk products (including Full Cream Milk, Low Fat Milk and Skimmed Milk) were put to the test.
The test aims to determine the prevalence and extent of veterinary drug residues contamination in milk products available in Hong Kong. The samples were examined for a total of 15 different drug residues comprising 2 beta-agonists, 3 synthetic hormones and 10 antibiotics.
Milk contaminated with excess drug residues is undesirable for human consumption. For example, long-term intake of antibiotics from food could result in a buildup of antibiotic-resistant organisms in humans.
At the end of last year, an amendment regulation to the Harmful Substances in Food Regulation came into operation to control the level of veterinary drug residues in food.
In the test, of the 15 veterinary drug residues, 9 were permitted antibiotics regulated with a maximum permitted concentration in milk products, the rest are regulated as prohibited substances.
The result: a clean bill of health for the samples. None of the samples were detected of any of the 15 veterinary residues tested.
The importance of nutrition labelling
The Government is studying the feasibility of implementing a nutrition labelling scheme. The FEHD study is expected to be completed by the end of 2002.
As nutrition labelling is not mandatory at present, the Council's survey found inconsistency in the labelling of the 30 milk product samples.
For instance, milk samples labelled with "high calcium" do not necessarily contain more calcium than those without such wordings. Considerable difference also exists on the fat content of the "Low Fat" milk samples, ranging from 2.4g to 5g per glass (i.e. 240 ml).
In view of the study on nutrition labelling, the Consumer Council has put forward the following to be taken into consideration:
- nutrition labelling should be made mandatory.
- establish conditions for claims such as "Low Fat", "High Calcium" and "Low Sodium" which commonly appear on food products.
- require manufacturers to have their products adequately tested before labelling such claims.
- standardize the format of nutrient content information (e.g. per 100g of food, per serving) to enable consumers comparing the values labelled on the products directly.
Warning on hazardous electric scooters
Consumers are warned of the serious consequences of driving mini electric scooters that do not meet safety requirements, and are not properly registered and licensed.
Consumers are in contravention of the law to drive such vehicles on any road in Hong Kong, and are liable on conviction to a fine of $5,000 and 3 months imprisonment.
Under the law, anyone who sells, supplies or hires such a vehicle is also liable to a fine of $20,000, unless the defendant can prove that he had reasonable cause to believe that the vehicle would not be used on a road in Hong Kong.
Further, in the event of an accident, driving without third party insurance which in itself is illegal, exposes the drivers to grave risk of compensation claims by their victims.
The Consumer Council reminds consumers that mini electric scooters, priced from around $1,000 to $5,000, are subject to control of the Road Traffic Ordinance.
Before it can be registered and licenced, it should be examined by the Transport Department to assess if the vehicle is roadworthy, meeting requirements of Road Traffic (Construction and Maintenance of Vehicles) Regulations.
Consumers are urged to apply for vehicle examination and abide by the law. According to the Transport Department's record, none of such mini vehicles, electricity-driven or petrol-driven, had been registered or licensed in Hong Kong.
Investors Beware
Share investors are reminded to stay alert and exercise due caution against potential malpractices.
First, investors should be wary if the contract notes of the transactions are in any way different from what they normally received from the stockbrokers.
For instance, if the contract note is not the usual computer printout. Or, if the information in English is typed by typewriter. Or, if it does not have an Order No. and Account No.
Consumers are advised that a proper transaction record should carry the following information:
- name and address of the stockbroker;
- your own name;
- date of transaction;
- settlement date;
- stock name and quantity;
- unit price, brokerage, contract stamp and net amount.
If any irregularities are detected, investors should report immediately to the management of the securities company. If the company is unable to offer a reasonable explanation and reissue you with a new contract note in the usual computer printout, report the matter to the Securities and Future Commission.
Second, do pay heed to the accounting firms requesting your confirmation of information in the monthly statements of your stockbrokers.
Read carefully and if you should discover any errors, report the matter directly to the accounting firm which is conducting an independent audit of the operation of the stockbrokers.
Do not contact your stockbrokers or accept any explanations that they may offer, as this will unduly defeat the purpose of the audit.
Other highlights in this February issue of CHOICE include test reports on digital cameras (26 models) and MD players/recorders (13 models).