Big banks kick off low rate credit card wars
A long-overdue price war has broken out amongst Australia’s major banks, as competition to offer Aussies the lowest credit card interest rate heats up.
ANZ made the first move by cutting rates on two of its credit cards, the Low Rate Credit Card and the Low Rate Platinum, which dropped from 13.49% to 12.49% and 11.49% respectively. These are the lowest rates the bank has offered since 2003, and came as welcome news to ANZ customers.
Westpac fired back around a week later, by announcing a new low rate credit card to be released in coming months, with an interest rate below 10%. The new piece of plastic will also pack an annual fee lower than $100, and is likely to come with 40-55 interest free days and a relatively low credit limit of $4,000.
Smaller provider HSBC also announced a new Low Rate Credit Card which has a purchase rate of 13.25% and annual fee of $55, to replace the discontinued HSBC Credit Card, which carried an interest rate of 17.99% and $0 annual fee. With a balance of $4,000, a spender would stand to save $52 in interest over 12 months with this new offer, even accounting for the annual fee.
Other big players CommBank and NAB are yet to make a move, but at the recent Senate Inquiry, NAB suggested it was in no hurry to follow ANZ and Westpac’s lead.
But Mozo Product Data Manager, Peter Marshall, thinks that with enough pressure, the two remaining big banks will make changes to their own credit card options.
“None of the big banks want to be an outlier,” he said. “None of them will want to be seen as the only big bank not offering a low rate credit card.”
And while the changes are welcome, their timing has critics suggesting that the rate cuts are less altruistic than they might first appear. A number of experts have pointed out that the rate changes have come at the perfect time to take the heat off big bank executives as the senate inquiry continues.
“Is this the start of single-digit credit card rates across the market? No, I don’t think so. Mostly, this is the big banks trying to persuade us away from a Royal Commission into banking and particularly credit cards, which remain a major profit driver for banks,” Marshall said.
Compared to other low rate offerings already in the market, these new big bank deals are competitive enough, but not unique, according to Marshall.
“It’s great to see the big banks cutting credit card rates - but there are plenty of cards out there offering comparable functionality at cheaper price points. Some mutual banks especially are offering very competitive deals,” he said.
Lowest rate credit card offers
|Credit card||Ongoing purchase rate||Annual fee|
|Police Credit Union SoLo Credit Card*|
*Product no longer exists (as of 18/12/2018)
|Community First Credit Union McGrath Pink Visa||8.99%||$40|
|Easy Street Easy Low Rate Visa||8.99%||$40|
|Bank Australia Low Rate Visa||9.39%||$59|
|G&C Mutual Bank Low Rate Visa||9.49%||$50|
If you want a low rate piece of plastic for your back pocket, head over to our credit card comparison tool to search the market for the best offers around.