Credit card users have spent an unnecessary $2 billion in credit card interest

AUSTRALIANS have been ripped off by more than $2 billion since 2011. It’s all because of the banks’ failure to pass on a particular type of saving.

EXCLUSIVE

AUSTRALIANS have been ripped off by more than $2 billion since 2011 because greedy banks have failed to pass on official interest rate cuts to credit cards.

Customers have forked out an extra $281 each in the past four years because they’ve missed out on cash rate falls, according to new findings by consumer watchdog Choice.

Its research shows that if banks moved in line with the RBA — there has been 10 drops since November 2011 — the burden of owing money on plastic would have considerably lessened.

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The findings come just weeks before a Senate inquiry into why financial institutions have failed to apply to RBA rate falls to credit cards.

Choice campaigns manager Erin Turner said the pain of owing debt on plastic has continued to hit Australian card users hard.

“This comes at a time when one in five Australians are living off their credit card to get through to payday,’’ she said.

Ms Turner attacked the nation’s big banks and said they control more than 80 per cent of the card market which meant interest rates on cards weren’t competitive.

“They aren’t competing on price and are keeping consumer costs high even though their costs for providing credit have dropped,’’ she said.

Choice will present the detailed findings as part of a submission to the Senate committee on the upcoming card inquiry.

The analysis also found since the RBA began dropping the cash rate, of the 55 major credit card providers only 16 per cent adjusted their card rates in the month after an official cash rate fall.

Data from financial comparison site Mozo shows the average credit card rate has managed to defy the downward cash rate cycle by actually climbing — in June 2011 it was 17.41 per cent compared to 17.61 per cent in May this year.

Mozo’s analysis also found the average credit card fee has climbed from $94 in 2011 to $115.

News Corp Australia recently revealed federal Treasury modelling that showed banks’ profit margins on cards had increased by a third since the Global Financial Crisis.

The Australian Bankers’ Association’s chief executive Steven Munchenberg said interest rates on cards range from 5.3 per cent to 20.99 per cent and customers needed to be proactive in getting a good deal. News_Image_File: Australian Bankers' Association chief executive Steven Munchenberg said customers needed to go on the hunt for a better card deal if they weren’t happy with their current rate.

“Each credit card product offers a range of benefits — from no frills to premium options — and consumers should shop around and find the right credit card that suits their circumstances,’’ he said.

The cash rate is sitting at a record low two per cent and is widely tipped to remain on hold when the RBA meet again today. (TUES)