Not all interest rates are falling in Australia at the moment.
Credit cards are not following suit, with some actually increasing their rates.
Australian credit card holders have paid an extra $2.11 billion in interest charges since November 2011 because many banks have not passed on the Reserve Bank’s cash rate cuts to cardholders, according to credit card comparison website creditcardfinder.com.au.
The average credit card purchase rate has remained at 17 percent since November 2011 when the Reserve Bank began cutting the cash rate this cycle, according to the creditcardfinder.com.au database.
The 10 cash rate cuts since November 2011 were tracked.
It was found that if credit card providers passed on the Reserve Bank’s full 2.25 percentage point cuts, the average credit card purchase rate would now be 14.25 percent.
Furthermore, it’s been revealed that credit card holders would have paid $2.11 billion less in interest over that period.
From November 2011 to May 2015, banks made an estimated $21.03 billion in interest – they would have earned about $18.92 billion if credit cards followed the cash rate cuts.
Michelle Hutchison, Money Expert at creditcardfinder.com.au said credit card providers are under greater pressure to maintain their profit margins.
“Credit card providers are clearly doing everything they can to hold onto their profit margins, as they’re under greater pressure with cardholders being more responsible with their spending.
For instance, we’ve seen a year-on-year decline in total balances accruing interest every month since August 2012.
Before the GFC we saw up to 19 percent growth to credit card debts accruing interest year-on-year.
We’re not expecting most credit card providers to improve their credit card rates and pass on cash rate cuts as this trend of better credit card spending looks set to continue.”
With two cash rate cuts this year, just 11 credit cards have dropped their purchase rates since January 2015, while another 10 cards have increased their purchase rates, out of the 356 credit cards monitored by the site.
Out of the 11 cards that have lowered their rates, Quay Credit Union’s Visa Credit Card saw the biggest drop to its purchase rate, by 3.00 percentage points to 7.99 percent – the lowest ongoing rate on the market.
The 10 cards that have increased their purchase rates this year include from Bankwest, Illawarra Credit Union, Family First Credit Union, Virgin and Coles.
The biggest hike was 2.00 percentage points by Coles for its No Annual Fee MasterCard, now 19.99 percent.
“Cardholders don’t have to put up with no rate cuts or higher interest rates. There are hundreds of credit card on the market, many with competitive rates and fees. So it’s worth shopping around, comparing special offers as you can potentially save hundreds – even thousands of dollars – in fees,” said Mrs Hutchison.