The Senate inquiry into Australian credit cards was informed local providers are exploiting “consumer inattention” to keep interest rates much higher than the Reverse Bank of Australia’s official interest rate.
Michael Willcock, the Federal Treasury deputy secretary, added that competition between credit card companies focuses on rewards scheme and balance-transfer offers so much that it’s “hard to find promotional material on headline interest rates.” Without this publicity, many of the four million Australians that do not pay their credit card balance in full each month are unsure exactly how much interest their habit incurs.
Stephen Mickenbecker, group executive of financial comparison service Canstar, supported Mr Willcock’s assertions, telling the inquiry there had been an “extraordinary blowout” between the Reserve Bank’s cash rate and average Australian card rate. He presented evidence showing the gap now stood at more than 14 percent points, up from around 8 percentage points in 2007.
However despite the evidence to the contrary, Tony Pearson, the executive director of the Australian Bankers Association, insisted the local credit card market was “strong, competitive, and diverse.”
Liberal senator Sean Edwards, who is serving as the inquiry’s deputy chairman, suggested that perhaps minimum repayments should be increased, as in most cases they don’t cover interest charges. Mr Pearson countered, stating “I suspect that contention is incorrect. If it didn’t cover interest you’d never pay it off.”
While Mr Pearson is skeptical of Mr Edwards’ assertions, studies from Mozo support his claims. The comparison service has found the interest rates of half of Australian credit cards are so high that borrowers will die before repaying their cards if they only make the minimum repayments.
With credit card interest rates so over inflated, it makes sense to quickly pay down these debts. If your credit card debt seems insurmountable, contact Chase Edwards. Our debt reduction experts can put a strategy into place to help you pay off your credit card and discover financial freedom sooner.