Credit card interest rates won’t budge despite interest rates being at record lows

DESPITE record low interest rates credit card rates are nearly 10 times the nation’s cash rate — the highest ever ratio. What you need to know.

Several Australian lenders dropped their credit card interest rates last month.

EXCLUSIVE

Credit card interest rates are nearly 10 times the nation’s cash rate — the highest ever ratio — and remain stubbornly high despite rates being at record lows.

Since the Reserve Bank of Australia began its downward spiral of rate cutting back in November 2011 the cash rate has plummeted from 4.75 per cent to 1.75 per cent but during this time the average credit card interest rate has remained around 17 per cent.

Experts are urging card users not to be complacent with their credit deals because card interest rates range greatly from 7.99 per cent to more than 20 per cent.

Analysis crunched by financial comparison website finder.com.au has found in 2011 the average credit card interest rate of 17.41 per cent was nearly four times the cash rate.

This compares to now where the average card interest rate is 17.28 per cent and is nearly 10 times the cash rate.

The site’s spokeswoman Bessie Hassan said plastic users “feel that they’re getting ripped off by banks’ failure to pass on cash rate cuts.”

“It’s time the banks pass on the benefits of the declining cash rate to credit card customers,’’ she said.

Latest RBA statistics show in March Australians owed $51.7 billion on credit cards and $32.6 billion is accruing interest.

Only a handful of lenders passed on the 25 basis cut to their cardholders last month including Bank Australia and G & C Mutual Bank.

The Australian Bankers’ Association’s chief executive officer Steven Munchenberg said the card market was “very competitive” but said borrowers should understand card interest rates do not coincide with the cash rate.

The report found “it is neither realistic not reasonable to expect a direct correlation between the RBA cash rate and credit card interest rates.”

Bank Australia’s deputy chief executive officer John Yardley said a majority of their customers pay off their card each month and avoid interest charges but he said they should be always looking for cheaper card offers.

“Credit cards are generally profitable products and I think many (lenders) could drop their rates,’’ he said.

“It definitely pays for people to look around.”

Bank Australia’s Low Rate Visa Card fell by 25 basis points to 9.64 per cent.

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Originally published as Credit card interest rates won’t budge despite interest rates being at record lows