Westpac to charge 'interest on interest'

By Mozo ·

Westpac is set to charge interest on existing interest charges and credit card fees.

In a letter to its credit card holders, the bank said that from June "interest will also apply to interest charges and fees on your credit-card account", the Daily Telegraph reported.

Westpac defended the change by saying it would simply bring the bank into line with industry standards.

However, Choice spokesman Christopher Zinn said the move was "sneaky", adding that the decision of the major banks to charge interest on interest would make it harder for customers to compare credit cards.

"This is one of those things that makes it very hard to compare cards and know what the interest rate is. The headline rate is not really meaningful because there are different ways of calculating interest," added Mr Zinn.

Westpac argued the change would have a minimal impact on balances, adding that for an average credit card balance of about $3,600, customers would only pay an extra 67c a month in interest.

Reserve Bank assistant governor Malcolm Edey recently said the bank has not yet made a decision on whether more competition or direct regulation is needed to reduce credit card fees.

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