CHOICE says the big four banks are punishing consumers with
astronomically high credit card interest rates
Consumer advocacy group CHOICE is encouraging consumers to shake off the
"lazy tax" and switch out of credit card products offered by the big four
banks to get a better interest rate
through credit unions and smaller lenders.
The call comes as Senators seek answers today from the Reserve Bank as to
why there's such a big gap between the official cash rate,
currently at a historic low of 2%,
and credit card interest rates which can be well over 20%.
"The big banks are punishing their credit card customers with
crippling rates of interest and with official rates at record lows we
deserve to know why the banks are failing to pass on savings," says CHOICE
spokesperson Tom Godfrey.
"A credit card is often viewed as essential and we know that Australians
rely on their credit cards to get by.
In March this year our Consumer
Pulse survey found that 1 in 5 people lived off a credit card to cover the
gap until pay day."[1]
The CHOICE survey also found that 46% of people were worried about their
level of debt, including mortgage and credit card debt.[2]
"We also know most people are paying over $700 in interest each year but
consumers can save today by switching to a card with a better interest
rate."[3]
CHOICE has had long standing concerns that credit cards are overly complex
and designed to distract consumers
from very high interest rates by putting a focus on rewards schemes,
interest-free periods, balance transfers and 'low' annual fees.
"Consumers can save today by
switching to a better card. Some platinum and high rewards cards charge over
20% interest but even the big banks' low interest cards have astronomically
high rates compared to smaller lenders and credit unions," says Mr Godfrey.
CHOICE has compared the big bank low rate credit cards to the best
rates in the market according to Mozo.
"There is a 4.5% difference between the rate charged by most banks for a
"low rate" card and the best rate we found in the market today. This tells
us that no one should be using a credit card from a major bank unless they
pay the balance in full every month," says Mr Godfrey.
"Until the GFC, there was at least a
rough correlation between the cash rate and credit card interest rates. This
seems to have changed in the last few years. Low rate and standard card
rates have remained relatively static while the cash rate has hit record
lows. We can only assume that the big banks are pocketing the savings."
Low Rate credit
cards compared – big players
|
Lender |
Card |
Interest rate (1 June 2015) |
|
American Express |
Low Rate Credit Card |
11.99% |
|
ANZ |
Low Rate Credit Card |
13.49% |
|
Commonwealth Bank |
Low Rate Credit Card |
13.49% |
|
NAB |
Low Rate Credit Card |
13.49% |
|
St. George |
Vertigo Credit Card |
13.24% |
|
Westpac |
Low Rate Credit Card |
13.49% |
Low rate credit cards compared – best rates in the market
|
Lender |
Card |
Interest rate (1 June 2015) |
|
Community First Credit Union |
McGrath Pink Visa |
8.99% |
|
bankmecu |
Low Rate Visa |
9.89% |
|
ME |
Frank Credit Card |
9.99% |
|
Victoria Teachers Mutual Bank |
Visa Platinum Credit Card |
9.99% |
|
G&C Mutual Bank |
Low Rate Credit Card |
9.99% |
[1]The survey was designed and analysed by CHOICE with fieldwork by GMI/Lightspeed
Research conducted with 1,049 consumers aged 18-75 years between 17 and 24
March 2015. Final data has been weighted to ensure it is representative of
the Australian population based on the ABS Census 2011. The March 2015
CHOICE Consumer Pulse survey found that 21% of Australians lived off a
credit card to cover the gap until pay day. 46% of people were worried about
their level of debt, including mortgage and credit card.
[2]Ibid.
[3]The ASIC MoneySmart credit card debt clock shows that the average
Australian has a credit card debt of $4,113 and is paying over $740 in
interest each year. Debt clock as at 11.30am on 1 June 2015, see
https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock