Weekend Herald

Sorry, but the fi­nal move is cheque­mate

Like it or not, che­ques are near­ing the end of the line. Now, the only op­tion is to learn new ways of pay­ing

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Q: My BNZ branch ad­vised me re­cently that from July 2021 they will not is­sue cheque­books to cus­tomers. Is there a bank in New Zealand that will have them af­ter that date, as I will trans­fer all my ac­counts plus term de­posits to them ASAP?

Be­sides a date to stop — or even bet­ter, not to stop — would they also tell you how many che­ques a day they process to ver­ify the 55,000 per day I read a while back?

A: First, I think you’ve mis­un­der­stood what you were told — or per­haps the banker got it wrong. BNZ has al­ready stopped is­su­ing cheque­books, although you will be able to de­posit and write che­ques un­til July next year.

How­ever, a spokesper­son says, “We’ll be work­ing with cus­tomers and other stake­hold­ers over com­ing months to en­sure they have al­ter­na­tive ways to ac­cess bank­ing ser­vices by the time the phase out is com­plete.”

Not happy with that? Our ta­ble shows that your best bets if you want to switch banks are SBS and TSB. But, as an SBS spokesper­son points out, while that bank has no plans to stop is­su­ing cheque­books, “The phas­ing out of is­su­ing and ac­cept­ing che­ques by com­peti­tors will mean our cus­tomers will be un­able to use che­ques as a form of pay­ment if the com­peti­tor banks don’t ac­cept them.” And the Min­istry of So­cial De­vel­op­ment re­ports that New Zealand Post, In­land Rev­enue and ACC are all no longer ac­cept­ing che­ques.

At TSB, a spokesper­son says, “We proac­tively work with our cus­tomers to sup­port them to use our on­line and mo­bile bank­ing ser­vices as an al­ter­na­tive for che­ques. Dur­ing Covid- 19 lock­down our peo­ple hap­pily spent up to an hour on the phone get­ting cus­tomers up to speed with dig­i­tal bank­ing tech­nol­ogy.”

Wher­ever you turn it’s the same story. You’re go­ing to have to take the bull by the horns and learn an­other way of pay­ing bills, per­haps on­line. It’s not dif­fi­cult — hon­estly. Af­ter the first few times, you’ll be breez­ing through it.

In my sur­vey of the banks, I asked them to briefly ex­plain what they were do­ing to help cus­tomers ad­just to the demise of che­ques. Most banks were so keen to list all of their ac­tiv­i­ties that I could half fill this col­umn with them. The word “briefly” got a bit lost.

Suf­fice to say, ev­ery bank says it is work­ing hard on this. Among the more un­usual as­sis­tance, Ki­wibank says, “We of­fer a pro­gramme of Tech Teas in branches, where cus­tomers can have a cup of tea while we up­skill them on how to use in­ter­net bank­ing. We also fund Dora ( Dig­i­tal On- Road Ac­cess), a bus which tours the coun­try de­liv­er­ing dig­i­tal bank­ing classes.”

On how many che­ques are still in use, I’m not sure that num­bers per day tell us much. But sev­eral banks re­ported that they make up less than 1 per cent of the pay­ments pro­cessed, and that keeps de­clin­ing. Chee­rio che­ques.

Mak­ing his­tory

Q: In a re­cent answer, you re­ferred to “cheque and sav­ings ac­counts”. With elec­tronic trans­fers, in­creas­ingly “che­ques” are no longer used.

Ki­wibank no longer uses this term, and in­creas­ingly such ac­counts are no longer linked to a “cheque­book”. Should we be seek­ing a more ap­pro­pri­ate name when re­fer­ring to such ac­counts?

This change was brought home to me a few years ago when new ten­ants — a young pro­fes­sional cou­ple — wanted my bank ac­count num­ber to start rent pay­ments. I pulled my cheque­book out to get a de­posit slip from the back. They were amazed to see a cheque­book and wanted to know what it was.

My son has a birthday cheque from my mother which he is keep­ing as a sou­venir. He reck­ons he will get more for it as a col­lectible item than its face value.

A: I love your sto­ries. It’s fun to see the older gen­er­a­tion puz­zling the young ones for a change — over an old­fan­gled tool!

Good luck to your son. It might take a few decades for his col­lectible to be worth much. But in any case, it’s sure to have value to him as a sym­bol of grandma’s love.

On the names of ac­counts, I’m sure the banks will take care of chang­ing the names.

Play it safe

Q: I am soon to re­ceive an in­her­i­tance of $ 50,000. I want to en­sure I man­age this wisely. I am con­sid­er­ing my in­vest­ment op­tions. How­ever, it is likely I will need this money in two to three years to pur­chase my own house.

Is it worth in­vest­ing for such a short du­ra­tion, es­pe­cially con­sid­er­ing the cur­rent global fi­nan­cial out­look, or safer to keep it in the bank?

A: Any money you plan to spend within three years is best put in bank term de­posits or a cash fund. In any­thing riskier, the value might fall right be­fore you want to with­draw the money. That’s true re­gard­less of the global fi­nan­cial sit­u­a­tion.

Time and again, big down­turns come out of the blue. This year’s Covid plunge is just one of many ex­am­ples.

Cash funds are the low­est- risk man­aged funds — both in and out of Ki­wiSaver. If you’re un­der 65, choose a non- Ki­wiSaver fund so you can with­draw money when­ever you want to. Over 65 you can with­draw from ei­ther type, and Ki­wiSaver funds tend to have lower fees so you might as well use one of those funds.

Ac­cess is one ad­van­tage of these funds over term de­posits. An­other is that they are PIEs, so tax on your re­turns is a bit lower. You do have to pay fees, though.

For in­for­ma­tion on cash funds — in and out of Ki­wiSaver — go to the Smart In­vestor tool on sorted. org. nz and choose “De­fen­sive funds”. Within that group, look for funds with “cash” in their names.

The re­turns given there are af­ter fees. They fluc­tu­ate a bit — click on “De­tails” un­der the re­turns sec­tion for each fund. And un­like term de­posits, you don’t know what fu­ture re­turns will be. But at this low- risk level, re­turns are un­likely to change much from the re­cent past. And — be­cause cash funds are a bit more un­cer­tain than term de­posits — they are likely to give slightly higher av­er­age re­turns af­ter fees.

If you pre­fer to stick with bank term de­posits, check in­ter­est. co. nz to see which bank is of­fer­ing the best in­ter­est rates.

Know the odds

Q: Last week, one of your cor­re­spon­dents sug­gested in­vest­ing Bonus Bonds pro­ceeds into a term de­posit and us­ing the in­ter­est earned to buy Lotto tick­ets, as a way to “keep the money” and still have a flut­ter.

True, but they miss the point that the per­son who sim­ply com­pounds the in­ter­est in­stead of buy­ing Lotto would, on av­er­age, be much bet­ter off. It is as sim­ple as know­ing the Lotto odds that, on av­er­age, one spends more than $ 300 to win Lotto’s min­i­mum mon­e­tary prize of about $ 25.

The sug­ges­tion made re­minds me of an­other let­ter pub­lished in your Septem­ber 26 col­umn ti­tled “An of­fer so great, you just have to hang up”. I guess all those re­ceiv­ing money back from Bonus Bonds will need to be alert to the “Do I have a great deal for you” ap­proach from oth­ers, in­clud­ing from Lotto.

A: I think you might be the one miss­ing the point!

You’re quite right, that com­pound in­ter­est in a term de­posit — al­beit at pa­thet­i­cally low cur­rent rates — beats Lotto on av­er­age.

But re­cent letters have been about the fun peo­ple get from an in­vest­ment that gives them a chance of win­ning big — even a tiny chance. For many peo­ple that fun is part of the re­turn, and they’re will­ing to give up a higher mon­e­tary re­turn to get it. Read on.

Hav­ing a flut­ter

Q: Fur­ther to your ques­tion re other banks that of­fer prizes — now that Bonus Bonds are clos­ing down — the Co- op­er­a­tive Bank has a prize win­ner ac­count in which they give away a Mini ev­ery month. It’s nowhere near as much as Bonus Bonds but I imag­ine the odds are greater.

Like many of your read­ers, I have loved Bonus Bonds and put in around $ 35 a week. I found it slightly ar­ro­gant of some of the fi­nan­cial big- wigs to mock peo­ple’s love of the non- in­ter­est- earn­ing Bonus Bonds.

For me it was a fun al­ter­na­tive to ac­tu­ally los­ing money on Lotto ev­ery week.

And at least ev­ery day, de­spite the in­fin­i­tes­i­mal chances, there was al­ways a pos­si­bil­ity that I could go to the let­ter­box and open an en­ve­lope say­ing “You have won a mil­lion dol­lars!” ( or in the end, an email).

A: Years ago, when I was a news­pa­per re­porter, a bud­get ad­viser who worked with peo­ple on re­ally low in­comes told me she didn’t sug­gest these peo­ple stop their weekly Lotto flut­ter. “It gives them a bit of fun and a ray of hope — for not very much money,” she said.

Life is not all about dol­lars. You’re right about the Co­op­er­a­tive Bank. It of­fers “the monthly prize of a Mini Cooper for those cus­tomers that have a Prize Draw Saver ac­count with us,” says a spokesper­son. “For ev­ery $ 100 of a cus­tomer’s av­er­age daily ac­count bal­ance, they get an en­try into our monthly draw — so the more they save, the more chances they have to win.” Un­til Oc­to­ber 31, the bank is also of­fer­ing a $ 2020 prize draw.

“This is a lim­ited pro­mo­tion we are run­ning for cus­tomers who join and open an ev­ery­day or sav­ings ac­count with us. Ex­ist­ing cus­tomers are also au­to­mat­i­cally el­i­gi­ble. We have one draw each week for six weeks — it’s a way to try and make 2020 a lit­tle bit bet­ter for us all — by adding a dol­lar sign in front of it!” She says the odds of a win are low, but “in com­par­i­son to win­ning big on Lotto or win­ning the mil­lion dol­lars with Bonus Bonds they’re pretty good!”

Su­per tax re­fund

Q: A re­cent let­ter in your col­umn was re­gard­ing not up­dat­ing your tax sta­tus when you re­tired, years later cor­rect­ing it with IRD, and get­ting a re­fund for the ex­tra NZ Su­per you had missed out on.

That is my case as well. But although I have been en­joy­ing the new rate since May, the per­son I was deal­ing with made no men­tion about ap­ply­ing for a back­dated re­fund.

I was al­ways un­der the im­pres­sion that if you did not claim cor­rectly, that was your prob­lem. Put it right, but no back­pay! Have I been wrong? Should I now ap­ply for back­pay of over two years?

A: Prob­a­bly. Says an In­land Rev­enue spokesper­son, “Ev­ery­one’s cir­cum­stances are dif­fer­ent, but if some­one be­lieves they’ve had too much tax de­ducted they might be en­ti­tled to a re­fund.

“For the 2019 and 2020 tax years cus­tomers are au­to­mat­i­cally as­sessed, and In­land Rev­enue now checks au­to­mat­i­cally ( auto- calc) to see if they’re en­ti­tled to a re­fund at the end of each in­come year.

“They can, how­ever, check to see if they’ve paid too much tax. To check if they were en­ti­tled to a re­fund from pre­vi­ous years, they would need to check if they had re­quested a Per­sonal Tax Sum­mary ( PTS) for those pre­vi­ous years. There was no re­quire­ment for a PTS from this group of cus­tomers pre auto- calc, as it was as­sumed they were taxed cor­rectly from source.”

She adds, though, “If a cus­tomer wants to ret­ro­spec­tively re­quest a PTS they need to be aware of the fol­low­ing: “IR can’t is­sue a PTS af­ter four years have passed since the end of the in­come year in which it would ap­ply. When re­quest­ing a PTS a cus­tomer is li­able for the out­come.”

In other words, if you go through this process and find that you owe tax, you must pay it.

But still, it might be worth a go for you. So how do you go about it?

“For a cus­tomer to check if they have a re­fund due in pre­vi­ous years, they can log in to myIR and do the cal­cu­la­tion to de­ter­mine any re­fund or tax to pay and re­quest the PTS. Al­ter­na­tively, they can call 0800 257 777 to re­quest a PTS through our self­ser­vice op­tions 24 hours a day, seven days a week.”

Good luck. Let us know if you get a re­fund.

Mary Holm, ONZM, is a free­lance jour­nal­ist, a sem­i­nar pre­sen­ter and a best­selling author on per­sonal fi­nance. She is a direc­tor of Fi­nan­cial Ser­vices Com­plaints Ltd ( FSCL) and a for­mer direc­tor of the Fi­nan­cial Mar­kets Author­ity. Her opin­ions are per­sonal, and do not re­flect the po­si­tion of any or­gan­i­sa­tion in which she holds of­fice. Mary’s ad­vice is of a gen­eral na­ture, and she is not re­spon­si­ble for any loss that any reader may suf­fer from fol­low­ing it. Send ques­tions to mary@ mary­holm. com. Letters should not ex­ceed 200 words. We won’t pub­lish your name. Please pro­vide a ( prefer­ably day­time) phone num­ber. Un­for­tu­nately, Mary can­not answer all ques­tions, cor­re­spond di­rectly with read­ers, or give fi­nan­cial ad­vice.

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