High interest rates have consumers ready to ditch credit cards

INTEREST rates are at record lows for everything except credit cards. Frustrated shoppers are ready to ditch the plastic once and for all.

AUSTRALIANS are fed up with interest card rates and ready to cut up the plastic once and for all, new research has found.

A finder.com.au survey of 2004 people found one in 10 credit card holders are considering getting rid of them due to excessive interest rates charged, despite rates being at record lows elsewhere in the economy.

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There are estimated to be around 16.7 million credit cards in circulation in Australia, meaning more than 1.5 million may soon have a date with a pair of scissors.

The response shows consumers have had enough, after standard credit card rates have stayed above 19.5 per cent on average since 2011, despite the RBA lowering the official cash rate 12 times; taking it from 4.5 per cent down to 1.5 per cent, finder.com.au spokeswoman Bessie Hassan said.

“Australians are getting better at paying off their credit cards and should be rewarded for this with lower interest rates,” she said.

While card providers have offered low rate products at various times, the median purchase rate is 18.99 per cent, finder.com.au numbers show.

Credit cards are facing the chop as Aussies tire of high interest rates.

RateCity statistics show only six out of 184 credit cards on the market have a rate below 10 per cent and spokeswoman Sally Tindall said frustrated consumers have other options.

“Most transaction accounts give you the ability to pay via Visa, MasterCard and PayPal, while some offer functions such as Apple Pay,” Ms Tindall said. “The main difference between a credit card and a transaction account these days is that a transaction account draws money from your own funds, rather than your bank’s so it’s much harder to find yourself in debt.”

If you want to ditch your credit card but have money owing, Ms Tindall suggests transferring the balance owed to a different financial product, such as a personal loan.

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“They have relatively low interest rates and a structured payment plan that will see you debt-free within a set time frame. That is critical,” she said, adding that personal loans were also good for larger purchases that would otherwise need a credit card; like a new fridge, or home renovation.

“If you know you have trouble paying off debt, avoid the temptation of a zero per cent balance transfer card. Hopping from one card to the next is rarely the answer unless you have read the fine print carefully and are extremely diligent about paying it off within the specified time frame.”

Originally published as High interest rates have consumers ready to ditch credit cards