Call for change: ME Bank urges reform to credit card industry
In a letter to the Standing Committee on Economics, which is currently conducting a review of the the big four banks, ME highlighted a number of areas in which it believed the industry needed reform.
CEO of ME, Jamie McPhee, stated that greater standardisation was necessary in the industry because credit card offers had become too confusing.
The bank has called for comparison rates to be mandated in a similar fashion to the mortgage industry, and for institutions to be required to ‘prominently advertise’ them along with any other rates to ensure customers can clearly and easily compare different cards.
“There are dozens of credit cards in the market which apply different fees and use different interest rate calculations, making it difficult for customers to accurately compare,” said McPhee.
“Improving competition by making switching easier would motivate banks to make better offers to customers, helping to drive down rates.”
ME has also advocated for the minimum repayment level to be raised above the current 2% rate and for a ban on all targeted credit limit offers.
Mozo’s debt payment calculator shows just how damaging a low minimum repayment can be, as a cardholder with the average balance in Australia of $4,300 who only repaid 2% each month, would take seven years and six months to pay off their entire balance and pay a whopping $3,375* in interest.
“Banning credit limit increase offers and increasing minimum monthly repayments would reduce the number of customers that get into serious debt,” McPhee stated.
The bank first recommended credit card reform in a 2016 submission to the Treasury’s public consultation ‘Credit cards: improving consumer outcomes and enhancing competition’.
ME’s renewed calls come as the Standing Committee on Economics reconvenes for a further round of public hearings starting tomorrow, following a number of hearings in October 2016.
If you would like to compare not only the interest rates but the fees from a number of providers on the market, head over to the Mozo credit card comparison hub to compare over 200 cards.
*Assuming they made no new purchases with the card and had the average rate of 17.32%