More can be done to keep excessive credit card interest rates under control.
The unexplained gap between the cash rate and the current credit card rates will be discussed at the Budget Estimates inquiry.
Reserve Bank of Australia officials will reportedly be questioned over the swelling gap between credit card interest rates and the cash rate, with Australia’s biggest credit card comparison website creditcardfinder.com.au urging more action needed to help keep credit cards under control.
Although the cash rate has dropped by 2.75 percentage points since 2011, the average standard credit card purchase rate is relatively unchanged at 19.75 percent, leaving Senators asking two Reserve Bank assistant governors why the 2.75 percentage points worth of savings have been kept from cardholders.
What can be done?
Michelle Hutchison, Money Expert at creditcardfinder.com.au, said more can be done to keep credit card rates under control.
“It’s finally come to public attention that many consumers could be feeling ripped off with their credit card rates as most credit cards haven’t passed on the Reserve Bank cash rate cuts since 2011.
Credit Card providers are under greater pressure to keep up with past profits and growth, as credit card holders are tightening down on their credit card use by paying more of their balance off each month.
In fact, the total balance accruing interest has been steadily falling since 2011.
However, more can be done to help consumers get a better deal on their credit cards.”
For instance, it could be a good idea to introduce a cap on interest rates to limit excessive rates being offered.
Currently, the most expensive credit card purchase rate is 25.90 percent while the most expensive cash advance rate is 29.49 percent.
“But there’s no reason to wait for the outcome of the meeting, cardholders should find a better deal now and stop paying too much interest.”
According to creditcardfinder.com.au, the lowest ongoing credit card purchase rate is 7.99 percent by Quay Credit Union and there are 72 cards that offer no interest on new purchases for up to 13 months.
Also, 157 credit cards are offering 0 percent interest for balance transfers for up to 24 months and 50 cards charging no annual fees.
“We’ve never seen so many promotions for credit cards.
If more cardholders took advantage of these deals and shopped around, this would force providers to be more competitive with their credit cards.”