Analysis by CHOICE and financial comparison site Mozo has revealed consumers have been tapped to the tune of $2.07 billion since 2011 as a result of credit card providers failing to pass on official interest rates cuts.
The data, released ahead of the Reserve Bank meeting today, examines the trends in the credit card market since late 2011, when credit card providers stopped moving interest rates in line with the official cash rate.
“If credit card interest rates had moved in line with the Reserve Bank cash rate over the last four years, Australians would have saved $2.07 billion in interest payments,” says CHOICE Campaigns Manager Erin Turner.
“The fact is an average credit card holder has paid an extra $281 because of unnecessarily high interest rates. Worryingly, this comes at a time when one-in-five Australians are living off their credit card to get through to payday.”
“The findings point to a systemic issue with Australia’s banking system. Because the big banks control over 80% of the credit card market, they aren’t competing on price and are keeping consumer costs high even though their costs for providing credit have dropped.”
CHOICE and Mozo analysed 55 major card providers from November 2011 to May 2015, finding that only 16% of card providers made any change to interest rates in the month after a drop in the official cash rate.
According to Mozo Director, Kirsty Lamont “We know the average credit card interest rate in June 2011 was 17.41% but instead of falling in-line with the cash rate it rose by 0.2% over the last four years to 17.61% by the 31st of May this year.”
“We have also seen the average credit card annual fee rise from $94 in late 2011 to $115 in May 2015. Clearly consumers are getting a raw deal.”
CHOICE will be presenting the detailed findings of its analysis as part of a submission to the upcoming Senate Committee on Economics Inquiry into Matters relating to credit card interest rates.
Consumers can find the lowest rate credit card in the market using the CHOICE’s Compare, Ditch and Switch tool powered by Mozo at http://betterbanking.choice.