Westpac, already identified as the world’s most profitable bank, has announced that beginning in June, it will charge interest on unpaid interest and fees for all credit cards issued. The new policy, implemented despite the bank’s roughly $17.5 million per day profit, was communicated via letter to their banking clients.

A representative for Westpac claimed the practice was common in the banking industry. She stated that half of the bank’s credit card customers, who paid their balance in full each month, would not be affected by the change, and that for those who would be, the amount was minimal. A customer carrying a balance of $3,600, the Australian average, who was already paying $72 each month in interest, would be charged an additional 67¢.

“We are only bringing our approach into line with industry practice,” said the Westpac spokeswoman. “It’s not a huge difference and it’s no different to how any of the other banks do it.”

The practice is uncommon in the U.K. and Canada, where the banking industry is more competitive. A representative for NAB admitted that bank also charged interest on interest, although not on fees.

Nevertheless, the practice drew ire from Christopher Zinn, a representative for the consumer group Choice. “I think interest on interest is sneaky.”

“This is one of those things that makes it very hard to compare cards and know what the interest rate is,” said Mr. Zinn. “The headline rate is not really meaningful because there are different ways of calculating interest.”

Calculated to be the world’s most profitable bank by the Boston Consulting Group, in the final quarter of 2009 Westpac earned a profit of $1.6 billion, or $17.5 million each day for those three months. That figure is one-third higher than the same time last year, and Westpac is the only major financial institution to earn more than 20% return on equity.

Following the corporate earning announcement last month, Westpac stock rallied, adding roughly $11 billion, or 16%, to the bank’s value.

Source: http://www.news.com.au/money/banking/westpac-to-charge-interest-on-credit-card-fees-and-interest-charges/story-e6frfmcr-1225844006597