Aussie banks 'have underestimated the cost of living'

Banks in Australia are seriously underestimating the cost of living when they approve credit cards and other products for their customers, new research has suggested.

A report by Bank of America-Merrill Lynch and cited by The Australian shows that lenders have relaxed their criteria for borrowing money following the global economic crisis in a bid to once again boost spending.

However, while the Poverty Index states that the average monthly expenditure for an Aussie couple is $1,814, the banks had predicted the figure would be closer to $1,708.

This could lead to more people to head online to compare credit cards as they may be more likely to be approved for a larger amount of credit.

Matthew Davison from Bank of America-Merrill Lynch said lenders approving credit cards and mortgages have clearly not been considering the impact of more expensive fuel, food and healthcare on consumers.

"We think banks lend too aggressively against living costs," he added.

This is despite people looking to compare credit cards being told earlier this month by the Federal Treasury and the Australian Bureau of Statistics that Aussies now have more money and less debt than ever before, the AAP reported.

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