Is This Simply ‘Shrinkflation’ By One Of Our Banks?
Our Banks and many other Corporations are being criticised for what seems to be a profit-first approach to business at a time in which many of their customers are struggling to meet basic needs. Some would say that businesses exist to profit for the benefit of their shareholders and therefore how else should they act?
As many of you know, my view is that instilling a profit-first motive in an organisation only leads to reduced competitiveness and performance resulting in less profits than could otherwise be earned. I also believe that there exists a symbiotic relationship between Corporations and the Communities in which they operate.
Point in case:
When I noticed the following, I wondered what the reasoning was behind the following change announced last month by one of our major Banks in Australia:
“Effective from 1 May 2024, if you hold a [listing of various card types] credit card, the period comprising your interest free period as set out in the Schedule of credit card particulars, which forms part of your credit card contract, is changing from “up to 55 days” to “up to 44 days”.
This notice was included in the five pages of ‘Important Notices’ attached to the credit card statement.
So, the effect is that my March — April statement balance was due for payment of 6 May 2024 but my April — May statement balance is now due on 24 May 2024, a reduction of 9 days from when it would have otherwise been due. Payment used to be due on a Monday and I would transfer payment on the weekend, now it is due on a Friday.
This may seem an insignificant change in timing, however, I fear that for many families and individuals this will result in distress, late payment and penalty interest because:
- They do not have the cash reserves to make an earlier payment.
- They just get by from week to week on their existing income and they plan their credit card payments against when they receive their wage/salary. And they can’t ask their employer to move their wage/salary payment forward.
- I suspect most people don’t read the pages of ‘Important Notices’ attached to their credit card statements and therefore will be caught unaware.
- And the switch from a Monday to a Friday payment may also catch some customers out.
Maybe it’s just me, but I wonder why would a Bank, at short notice (one month at most) and in these economic conditions, request their customers to pay their credit card balances up to 11 days earlier? Are they short of cash, do they not appreciate the strain and stress it will likely place on their most vulnerable customers or dare I even think, are they just chasing more profit which will be in the form of penalty interest?
As Business Leaders, and as a Community, I think we need to question the Why and Impact of the actions taken in our Corporations and not allow them to go unchallenged if we suspect it is simply profiteering.
I hope the Bank in question had carefully reflected on the impact of their actions and were not just applying ‘shrinkflation’ to make a little bit more profit.
What Are Your Thoughts?
