Why banks don't offer online credit card cancellations

You can sign up in minutes, but banks withhold the tools needed to easily cancel.

Banks including Westpac, ANZ, NAB and Commonwealth failed to offer online credit card cancellations as an option, instead resorting to lengthy "go slow" processes that could take up to five business days, in an effort to deter customers from going through with a card cancellation, a parliamentary inquiry has revealed.

This is in spite of mounting public pressure from consumer groups and the government to offer a simple way to cancel a credit card around the clock and in real-time.

NAB claimed to offer the functionality in March; however, in responses to questions asked during the inquiry, the bank clarified its "messaging service" would still try to get customers on the phone.

"After a customer lodges an online request to cancel their credit card, NAB will call them as part of the cancellation process.

"If the customer cannot be contacted after two attempts, the card will be cancelled as directed."

Commissions were paid to the staff of some banks if they could keep customers from cancelling their credit cards. Commonwealth Bank rewarded staff for convincing customers to keep their credit cards up until July of 2016.

This isn't a practice of NAB and ANZ, as the two banks claimed their staff incentives were calculated based on a range of metrics.

Westpac's chief executive Brian Hartzer told the inquiry the bank doesn't offer online cancellations because "we would like to have a conversation" with customers.

But the bank's own staff don't deal with credit card cancellations. It outsources the handling of card cancellations to a third-party specialised in "retention activity".

Credit cards have come under fire for charging high interest rates and continually rising late payment fees. The average annual cost of a credit card issued by one of the big four banks is $146, more than double the $58 fee charged by mutual or customer-owned banks.

Currently a customer can sign up to a credit card online with approval often being granted within 20 minutes, but to cancel a credit card requires customers to visit a branch, call during set hours or to send a written request in the mail.

CHOICE raised the issue of allowing customers to cancel a credit card online in 2015. The Federal government recommended banks offer the service to customers in a 2016 consultation paper, as did an independent reviewer appointed by a consortium of banks in 2017.

Only Commonwealth Bank has committed to offering online credit card cancellations. The bank announced in March its online service will let customers terminate a credit card in real-time when it launches "later in 2017".