Westpac hikes credit card interest: could this spark a trend?
Westpac recently increased the purchase rates on many of its credit card products, but is this rare change the beginning of more rate hikes to come?
The big bank raised purchase rates by 0.25% on its Low Fee, Low Rate, Altitude Platinum, Altitude Black and Low Fee Platinum cards.
Plus, the St George Group - including Bank of Melbourne and Bank SA, also bumped up purchase rates by 25 basis points and cash advance rates 100 to 200 basis points at the beginning of April.
Westpac's new rate increases mean that 4 out of 6 its credit cards now have purchase rates over 20%.
These changes come despite the anticipated rate cut that could come from the Reserve Bank soon.
The RBA sat their recent monetary policy meeting on Tuesday 7th May, and many experts predicted that there would be a cut to the official cash rate - but there wasn't.
This is the 30th consecutive meeting that the current low cash rate of 1.50% has stayed the same, after first being cut back in August 2016.
But, due largely to new cost of living inflation figures being below market expectations, experts still predict that a rate drop will come from the RBA eventually.
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So why did this big bank go against the grain and increase credit card rates despite these expected changes from the RBA? And crucially, can we expect the same from other credit card providers?
“The repositioning of rates by Westpac was a one-off in my opinion and was a decision made to increase business income on the cards,” Peter Marshall, Mozo’s Product Data Manager said.
“Over the last year no other banks have increased their rate, so I really doubt that they will follow suit.”
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For Westpac customers who regularly pay back credit cards by the end of each month, the changes won’t have an impact.
However, for those in a constant battle with interest and struggling to make credit card repayments on time, the increase could mean its time to review interest rates and potentially make the switch to a low rate card.
If you’re in the market for a more cost-friendly piece of plastic, check out our low interest rate credit card comparison table.