Credit card customers still getting gouged by high interest rates
Credit card interest rates have barely budged despite the continual downward spiral of the cash rate. Here’s how customers can avoid getting ripped off.
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Greedy banks have failed to drop exorbitant credit card interest rates despite the continual downward spiral of the cash rate.
The Reserve Bank of Australia began slashing the cash rate back in 2011 from 4.75 per cent and now it sits at just 0.5 per cent.
Yet in the same time the average credit card rate has moved only slightly from 19.69 per cent to 17.01 per cent, RBA figures show.
Analysis by financial comparison website RateCity found some lenders including ANZ and Westpac have even increased interest rates on some cards in the past 12 months.
The site’s spokeswoman Sally Tindall said the high rates were “unfair”.
“Customers with debt accruing interest with a rate above 20 per cent are getting ripped off,” she said.
“The credit card interest rates are becoming unfair the further the cash rate falls.
“The banks use this excuse that it’s riskier debt but there’s no reason it should be increasing.”
Banks often argue that because debt is unsecured – that is it doesn’t have an asset attached – it is riskier and therefore warrants higher rates than other products such as home loans.
Their database showed the average card rate in December 2018 was 17.06 per cent and since then there has been four cash rate cuts.
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However in this time the average card rate has fallen to just 17.01 per cent.
Ms Tindall urged customers who cannot pay off their debt in full each month to hunt for a deal with a lower interest rate.
Their database showed the cheapest interest rate deals start at 7.49 per cent while the highest rate is 24.99 per cent.
Latest RBA statistics showed Australians still owe a massive $43.7 billion on plastic and $27.1 billion is accruing interest.
The Australian Banking Association’s chief executive officer Anna Bligh said banks remained “fiercely competitive” when it comes to credit cards and offered plenty of options.
“Customers have a very wide range of options when it comes to credit cards with over 200 on the market, some with interest rates as low as 10 per cent and no annual fee,” she said.
“Different credit cards can suit different customers, with some desiring frequent flyer rewards, bonus schemes or simply the lowest interest rate on offer.”
The nation’s largest bank, the Commonwealth Bank, also on Monday revealed interest rate cuts across multiple savings account deals.
The interest rates on some accounts are a paltry 0.01 per cent.
The bank announced the cuts were effective immediately, however they will take three weeks after the RBA rate cut to pass the reductions onto customers.
Ms Bligh encouraged customers to hunt around for more competitive deals.