No interest rate cut relief for credit cardholders
In a market characterised by plummeting interest rates, there’s one group of Aussie borrowers who aren’t necessarily seeing the benefits - credit cardholders.
Although the RBA cut the official cash rate to a record low of 1.75% this month, prompting banks to reduce interest rates across home loans products, there’s been little change in the credit card market, with the average interest rate remaining around 17.43%.
“The average card rate is around 10 times higher than the cash rate which is a pretty monstrous difference,” said Mozo director Kirsty Lamont.
A paper released by the Australian Treasury recently agreed with this assessment, and made a case for changes to current credit card policy, which sees banks make massive profits off the debt of Aussie shoppers.
The paper identified “a relative lack of competition on ongoing interest rates in the credit card market” and proposed a number of reforms to this landscape, including tightening responsible lending obligations and requiring providers to allow the option of online credit card cancellations.
It said a subset of Aussie credit cardholders were feeling a “substantial burden on financial well being.” This burden comes mainly in the form of high interest charges, incurred partly “because of the inappropriate selection and provision of credit cards as well as certain patterns of credit card use.”
Lamont encouraged Aussies to avoid the bite of high interest by shopping around before settling on a credit card, as there’s no ‘one size fits all’ solution.
“If you are in the bucket of ‘revolvers’ who are paying interest each month, there’s no point having a premium credit card,’’ she said. Instead these kind of spenders should look for a card without the sting of an annual fee and with a low ongoing purchase rate.
Best low rate credit cards with no annual fee
|Credit card||Interest rate|
|ME frank Credit Card||9.99%|
|Heritage Bank Gold Low Rate||11.80%|
|Qudos Bank Lifestyle||12.34%|
|Bank Australia Visa Credit Card||12.89%|
|Victoria Teachers Mutual Bank Visa Classic Credit Card||12.94%|
To compare other low rate credit card options and find one that fits your budget and spending style, check out our credit card comparison here. Or, if you’ve found yourself saddled with a stubborn credit card debt, check out some of the best balance transfer offers around and get debt free faster.