CHOICE # 234

15 April 1996
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  • Consumers are paying excruciatingly high interest rates for the convenience of using plastic money
  • Test report on mobile phone battery and digital cellular phone.
  • New Electricity (Amendment) Bill 1996 requires suppliers of all electrical products designed for household use be responsible to ensure products they supply
  • Legionnaires' Disease and Indoor Air Pollution
  • Latest Transaction Prices and Supply of Residential Flats in Discovery Bay
  • Quarterly Supermarket Price Survey
  • Tar and Nicotine Contents of Cigarettes

Credit card consumers are paying excruciatingly high interest rates for the convenience of using plastic money. 

A Consumer Council survey has revealed that consumers could be paying interest rates for the money they owe credit card issuers at 2 to 3.5 percent per month. Or 24 percent to42 percent per annum. 

But depending on the banks or finance companies that issue the credit cards, in the majority of the cases, the interest rates are between 24 to 30 percent per annum. 

This is nevertheless substantially higher than interest rates being charged by credit cards in the United States or Japan. 

The extent of the excess is 37 to 71 percent more than the U.S. (17.5 percent p.a.) and82 to 127 percent than Japan (13.2 percent p.a.). 

The significantly higher rates of interests are charged in Hong Kong despite a lower bad debt rate of 1.58 percent. Generally, bad debt provision includes such factors as non-repayment, forged signature and the use of false credit cards, etc. 

Hong Kong's bad debt rate is less than half of that of the U.S. (3.5 percent) and is about the same as Japan (1 to 2 percent). 

Results of the survey which covered 19 banks and finance companies issuing credit cards in Hong Kong, were published today in the latest (234th) issue of the Consumer Council's monthly magazine 'CHOICE'. 

The Council's survey has showed that the difference between the highest and the lowest interest rates charged by credit card issuers could be as much as 1.5 percent per month. This means that for a debt of $10,000, the difference in the interest charge alone is $150a month. Such expense could go up with the addition of various other surcharges. 

And in the case of an outstanding balance of $10,000 fully settled 180 days (6 months) later, the difference in the interest charge by different card issuers could reach $678.In the case of a cash advance of $10,000 repaid 100 days later, the difference between the highest interest charge and the lowest is $541. 

Consumers are therefore advised to choose - and use - credit cards with care paying particular attention to the costs of such credit facility and not just the attraction of gifts and bonuses. 

Consumers should pay heed to such costs as the joining fee, annual fee, cash advance charges, finance charges for outstanding debt, and other miscellaneous fees. 

The report cautions consumers to think carefully before committing themselves to debts in the use of credit cards. If every time the card holder settles only the minimum monthly payment, even a small outstanding balance could turn into a long term burden of debt escalated by high interest rates and a host of other surcharges. 

For an outstanding balance of $5,000, for instance, if the cardholder repays only the minimum (5 percent) at a monthly interest rate of 2.5 percent, it would take him a total of 7 years and 5 months for the account to be fully settled. The amount of interests paid would be $4,212 or 84 percent of the original sum of debt. 

Besides the high interest rates, the report also noted the complex methods of calculation of interest charges and surcharges which all add up to the staggering costs of owing plastic money. 

The report drew the attention of credit card users to such "penalty traps" as: 

  • imposing finance charge from the very date of transaction; 
  • waiving interest-free-period for all new transactions for accounts with outstanding balance; 
  • charging a handling fee for cash advance and effecting interest charge from the very date of cash advance; 
  • late payment charge for failure to repay on the due date; 
  • surcharge for bounced cheques or autopay payments; 
  • charging a "cash deposit fee" if you pay your account with cash, etc. 

Meanwhile, the Council has received complaints that debt collection agents have harrassed people acting as personal reference in credit card application when the cardholders failed to repay or simply disappeared. 

At present, the names of personal reference are used in application form without the need for prior consent of the referees. 

The Consumer Council hopes that the Hong Kong Monetary Authority and the Hong Kong Association of Banks would soon be able to introduce a code of practice that would require the consent of the personal referee before his or her name is used in the application. 

Further, it should be stipulated that the referee will have no obligation for the debt of the applicant(s) in the event of nonpayment. 

A mobile phone can only be as good as the battery if it is to function at all. And, in turn, a battery is dependable on the battery charger to replenish its energy. 

In this April issue of 'CHOICE' is a test report on these two very essential paraphernalia of mobile phone usage. 

The test examined 16 models of battery in combination with 8 models of digital cellular phone. Another 15 models of battery charger were tested for their safety. 

The "Talk Time and Standby Time" results of the test conducted in laboratory using a standard "GSM cellular phone test set" are startling: 

Talk Time
The length of the talk time the battery samples could provide ranged from 1 hour 3minutes to 6 hours 51 minutes in the absence of the Discontinuous Transmission (DTX) energy saving mode provided by the GSM networks. 

But the talk time was considerably increased, by 30 to 50 percent, from 1 hour 23minutes to 9 hours 42 minutes with the operation of the DTX energy saving mode. 

The test showed that, as a general rule, for the same type of batteries, the heavier the battery, the longer the talk time it supplies. 

According to the test, the lithium ion battery, though more expensive, fared significantly better in performance than the other types of battery of the same weight. 

Standby Time
The time between starting and the signal of Low Battery warning was measured to be between 10 hours to 50 hours despite claims by phone manufacturers that the standby time should be longer. 

The report offers these simple tips for consumers to enhance the performance of talk time/standby time from their batteries: 

Energy Saving Mode 
This has been shown to increase the operating time by 30 to 50 percent. Consumers may wish to check with their network company and their phone supplier (a) if the DTX mode could be used, (b) if the DTX mode is already turned on by the handset manufacturer and (c) the procedures for DTX mode to be selected at the handset. 

Users' Mobility
If the phone user is in constant mobility traveling from one place to another, it will consume more energy of the battery. In this case, the user will do well to have a spare battery on hand. 

Network Coverage
If the user needs to stay for a long time in a No Service area (where the network's signal strength is weak or non-existent), the user is advised to switch off the phone completely or select "Periodic Searching" instead of "Continuous Searching" to save energy. 

In the test on battery chargers, 7 out of the 15 samples were found to be electrically unsafe. The main problems which pose potential hazards of electric shock or even electrocution, involved overheating and inadequate electrical insulation of the coils in the power supply. 

Further, all the samples were found to lack (a) user instructions and warnings (b) marking indicating the nature of electricity supply and (c) marking indicating the classification of the appliance, e.g. a sign for Class II appliances with double insulation. 

The Consumer Council welcomes the introduction of the Electricity (Amendment) Bill1996, which paves the way for the long-awaited Electrical Product (Safety) Regulation. 

The new regulation requires suppliers of all electrical products designed for household use be responsible to ensure products they supply should comply with certain safety requirements so as to ensure users to be protected from electric shock and other dangers. 

From 1991 to 1995, 28 severe electrical accidents relating to electrical products which involved death and injury were reported to the Director of Electrical and Mechanical Services. In some cases, death or injury could have been prevented if the electrical products involved were properly designed to protect user against electric shock.