| 09.01,12. 04:08 AM |
Great credit card gouge
CONSUMERS are being slugged up to $600 a year on credit cards because banks refuse to pass on interest rate cuts.
A Sunday Telegraph analysis of credit cards held by 7 million Australians has revealed interest rates are up to 4 percentage points higher than banks should be charging.
As credit card debt exploded again, by $22 billion over Christmas, banks are cashing in by more than $120 million a month in unchecked gouging.
According to exclusive research by RateCity, banks are charging a 25 per cent interest rate premium by not lowering rates in line with the Reserve Bank over the past five years. "Australians are paying much, much higher interest rates on credit cards than they should be," RateCity chief executive Damian Smith said.
"Interest rates on just about every other financial product -- home loans, savings accounts, term deposits - have come down, but credit card rates haven't budged."
About 2.2 million Australians who don't repay their card debt in full each month cough up more than $600 in additional interest every year, which props up the banks' record profits.
Acting Treasurer Bill Shorten condemned the institutions, saying the government was very concerned struggling families were being charged so much interest.
"We shall continue to fight to cut costs for banking customers," he said.
The analysis found the average credit card rate was 16.67 per cent but would be 12.68 per cent if banks had passed on rate cuts over the past five years.
Since January 2007, the RBA has raised rates 11 times and cut on eight occasions.
None of the big four banks -- which have 42 of the most popular credit cards among them, accounting for 80 per cent of the market -- has passed on last month's cut.
ANZ was the only major bank to react to the RBA's November cut, reducing the interest on just one of its cards.
But ANZ, Westpac, Commonwealth Bank and National Australia Bank raised rates on all of their cards in November 2010, the last time the RBA increased rates.
"This shows that banks are taking advantage of the fact we spend 15 per cent more on cards at this time of year and people have good reason to be cynical about the way the banks are behaving," Mr Smith said.
Consumer group Choice said people should not tolerate being ripped off by the banks.
"Customers are being taken for a ride on credit cards and that ride is always in one direction which is higher rates and less transparency," Choice banking spokesman Matt Levey said.
Westpac said it regularly reviewed its credit card rates irrespective of changes to the official cash rate. "We take into consideration a range of items such as our funding mix and the competitive position of our products," a spokeswoman said. "The majority of our rates remain equal to, or below our competitors."
An ANZ spokesman said the bank gave customers the options to access 55 day interest free periods on some cards.
A Commonwealth Bank spokeswoman said the bank's rates were competitive and were not directly linked to movements in official rates.
"A large proportion of credit card customers pay no interest on their credit cards at all, as they pay their credit cards off in full every month," she said.
NAB said it was the only bank to have abolished $25 credit card over-limit fees, cut credit card late payment fees from $30 to $5 and ensured customers paid off higher-interest items first.