| 10.12,11. 12:35 AM |
Banks hit new low on credit cards
December 10, 2011
SHOPPERS will pay at least $30 million extra in interest on Christmas gifts because 99 per cent of the nation's nearly 15 million credit cards haven't had their rates reduced in response to recent Reserve Bank cuts.
Among 58 card issuers - including all the big banks - only five have lowered interest charges, analysis for The Daily Telegraph reveals.
Incredibly, Macquarie Bank raised rates on two cards, including its "Ratesaver" card.
ANZ was the only major to cut rates and it did so on only three of its plethora of plastic products. Others that cut credit card rates include Sydney Credit Union, the BHP and Qantas credit unions, the WA Police & Nurses Credit Society and NSW's Bananacoast Community Credit Union.
All up, those cards account for less than 1 per cent of the nearly 15 million cards on issue in Australia, said Kirsty Lamont, director of mozo.com.au, which undertook the analysis for The Daily Telegraph.
More than half the cards on the market now have an interest rate higher than 20 per cent, Ms Lamont said.
East & Partners principal analyst Paul Dowling said banks controlled about 70 per cent of the market. He said margins on credit cards were three to five times fatter than for home loans - 6 to 10 per cent compared to 2 per cent.
"The banks' argument would be that credit cards are riskier lending," Mr Dowling said.
"But credit card default rates are very low - sub 2 per cent."
The further increase in credit card margins could not have come at a worse time for consumers. Credit card repayments will blow out by more than $1 billion this month, based on recent trends recorded by the Reserve Bank.
Australians owe nearly $50 billion on plastic, of which $36 billion is accruing interest. Only a third of shoppers pay off their credit card in full each month.
That means the near-total failure to pass on the central bank's cash rate cuts in November and December will add at least $15 million a month to repayments. Ms Lamont said it typically took at least two months for people to pay off their Christmas credit card bills.
"The banks might have decided to play nice for home loan customers, but credit card customers are not seeing the same festive spirit when it comes to rate cuts," Ms Lamont said.
"They know that not passing on the rate cuts prior to Christmas means they are going to receive a lot more interest of the next two months."
The major banks all said their credit card rates were under review. ANZ said it cut to become more competitive on those cards. None of the others would explain why they hadn't done likewise.
Macquarie failed to respond to questions.