CHOICE reveals banks’ sneaky $6.3 billion interest rate move

Australia’s official cash rate has been slashed again and again in recent months, but the same can’t be said for credit cards.

And it’s a move that has cost Australians a fortune.

In fact, a new analysis has revealed the failure of our major banks to pass on interest rate cuts has cost us billions over the past decade.

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Alan Kirkland, CEO of consumer advocacy organisation CHOICE, said the Reserve Bank of Australia had slashed the cash rate from 4.75 per cent in 2011 to the current historic low of just 0.25 per cent – but credit card rates had remained “stubbornly high”.

“By failing to pass rate cuts on for credit cards, banks have effectively stolen $6.3 billion dollars from the pockets of Australians,” he said.

“Some banks – including ANZ, Bendigo and St George – have even increased rates on credit cards.

“This is disappointing behaviour from an industry looking to restore trust after the scandals of the banking royal commission.”

Mr Kirkland said if credit card rates had been cut in line with the cash rate, it would have saved many Australians from “falling into a debt spiral and facing years of unnecessary hardship”.

“Banks have cut interest rates on mortgages as the cash rate has fallen. There’s no justification for failing to do the same for other credit products, especially now so many Australians have lost their job,” he said.

According to the research, the 12 cards with the biggest increase in interest rates since 2016 include Coles’ Low Rate MasterCard, ME’s Frank credit card, Police Credit Union’s Extralite credit card, ANZ’s Rewards, Rewards Black and Rewards Platinum, Australian Military Bank’s Low Rate Visa credit card, Bendigo Bank’s Platinum, Bank of Melbourne’s Vertigo, BankSA’s Vertigo, Citi’s Prestige and St George’s Vertigo.

CHOICE will today launch a crowd-funding campaign to raise cash for its Make Banking Fair campaign which will call on banks to do better.

Mr Kirkland urged Australians to take actions, warning that some banks had raised their credit card rates even as their costs had reduced.

“If you’re unimpressed with the interest rate your bank is charging, you should vote with your feet. Cancel your current credit card and switch to a bank with a lower-rate card,” he said.

“This will send the loudest message to the banks that they need to treat their customers fairly.”

Meanwhile, comparison site Finder has found the gap between the cash rate and credit card interest rate was now the widest ever, with the standard credit card interest rate nearly 80 times the cash rate.

If banks had passed on cuts to customers, the average card rate would be 12.90 per cent instead of 19.94 per cent.

Graham Cooke, insights manager at Finder, said as the gap between credit card rates and the cash rate grows even wider, credit card customers should shop around for a more competitive deal.

“The average credit card rate followed the cash rate from 1990 to 2010. Every time the cash rate went up or down, so did the credit card rate,” he said. “But that all went out the door from 2010 onwards.”

He said today’s credit card interest rates range from 11.99 per cent to 21.49 per cent – but that some Aussies just didn’t care.

“The reality is that at the high end of the credit card market, customers don’t care about the interest rate. They are in it for the points, and that’s what this data proves,” Mr Cooke said.

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