Credit card users ripped off $3.49 billion in interest after banks ignore RBA cuts

Aussie spenders have collectively forked out $3.49 billion more to their credit card

providers in interest since mid-2011, due to the banks routinely ignoring the RBA’s cash rate cuts.

That’s according to research by consumer advocacy group CHOICE , who compared the RBA rate against the average credit card rate from five years ago, to where both sit today.

As you can see in the tables below, despite the official cash rate being slashed by a significant 3.25% since mid 2011, the average credit card rate has dropped just 6 basis points.

Then (June, 2011):

Now:

Scenario: Let's say the banks had passed on the full 3.25% rate cut. Instead of a rate of 17.31% that would make the average rate today just 14.20%. For a cardholder with the average balance of $4,300 that would be a saving of $484.22 over 5 and a half years.

"The sad fact is that many Australians live off a credit card to get through to payday and the banks seek to capitalise on this by charging excessive interest rates and making it difficult to exit these toxic products,” said CHOICE's Head of Campaigns and Policy, Erin Turner.

"The banks' failure to put their customers first in this historical low interest rate environment doesn't bode well as we enter what could be a more inflationary part of the interest rate cycle.”

Mozo Director, Kirsty Lamont, said credit card customers would be far better off if competition in the industry improved.

“There is simply not enough competitive pressure in the Australian credit card market to stop the banks from charging excessively high rates,” she added.

Is your credit card interest rate more than you’d like it to be? Shop around for a more competitive deal here at Mozo with hundreds of products to browse through.