Local banks’ failure to apply interest rate cuts to credit cards has cost Australians more than $2 billion, according to new research from Australian consumer watchdog Choice.
The Reserve Bank of Australia (RBA) has made 10 interest rate cuts since November 2011. This has helped people paying off their mortgages, but credit card holders have been left out in the cold. Choice believes each local credit card user has been overcharged interest to the tune of $281.
The results are particularly troubling at a time when one in five Australians relies on their credit cards to fill the financial gap until payday. Erin Turner, Choice’s campaigns manager, said that interest rates aren’t competitive because big banks control more than 80 percent of the credit card market.
“They aren’t competing on price and are keeping consumer costs high even though their costs for providing credit have dropped,” she told news.com.au.
In fact, the average credit card interest rate has actually risen since RBA interest rates began to fall in 2011, according to financial comparison website Mozo. In June 2011, the average credit card interest rate stood at 17.41 percent. By May this year, it had climbed to 17.61 percent. Mozo also found the annual credit card fee has jumped from $94 in 2011 to $115 this year.
Choice will submit its findings when the Senate launches an inquiry into credit card interest rates in the coming weeks. However, it’s likely to be some time before we see the interest rates lowered.
A better way to outsmart the banks is to simply pay down your credit card and avoid the inflated interest charges altogether. That can be challenging, but Chase Edwards can show you how. Contact us today to learn more about the debt minimisation strategies that can help clear your credit card balance.