Credit card customers hit by excessive interest rates
Credit card customers have been denied relief on their payments by greedy banks withholding interest rate cuts.
Borrowers have been slugged $6.4 billion in unnecessary interest charges by 78 lenders who have failed to pass on every official interest rate cut since 2011 when the cash rate started to fall.
The analysis by financial comparison website Mozo found since 2011 the cash rate has plummeted from 4.75 per cent to just 0.1 per cent, yet credit card rates remain stubbornly high.
The average credit card interest rate was 17.44 per cent in 2011 and is now only slightly lower at 16.39 per cent.
If the same cash rate cuts were passed on to cardholders with a $4000 debt they would have saved $448 over nine years.
Mozo spokeswoman Kirsty Lamont said home loan customers have benefited from RBA cash rate cuts but plastic holders have missed out.
"Credit card customers continue to get the raw end of the stick with credit card rates failing to fall in line with the cash rate," she said.
"If you are paying interest on your credit card with a typical interest rate of 16 per cent or more you are throwing money down the drain.
"Switching to a card with an interest rate below 10 per cent and no annual fee could save you hundreds of dollars a year."
Latest Reserve Bank of Australia statistics show in September Australians owed $20 billion on personal credit cards accruing interest.
This is the lowest level of revolving card debt in 16 years.
AMP chief economist Dr Shane Oliver said card rates were "exorbitant" but they are higher than other loans because they are an unsecured debt.
This means there is no underlying asset such as a house or car the lender could sell to recoup money from the borrower.
"I would have thought card rates would come down a bit and I suspect they may come down over time because there is competition out there," Dr Oliver said.
Since March more than 654,000 credit card accounts have been shut down.
Many consumers have switched to using popular buy now pay later schemes such as Afterpay, Zip Pay and Humm - as of June 2019 there were more than 6.1 million accounts in Australia.
Of these the active accounts climbed from 2.7 million in the 2017-18 financial year to 3.7 million in the 2018-19 financial year.
BEST CREDIT CARD DEALS
American Express Low rate Credit card 8.99%
Credit Union SA Education Community Visa Credit Card 9.99%
Teachers Mutual Bank Credit card 11.5%
BankVic Visa Silver 11.95%
Hume Bank Value Visa Card 11.95%
Source: Mozo.com.au, $0 annual fee credit cards.
Originally published as Credit card customers hit by excessive interest rates