Nine credit cards increase interest ratesAccording to the research made, out of 221 credit cards only 61 have had no increase in their interest rates. 80 per cent of the cards who did have a reduction in rates, were totalling less than 2 percentage points.


Out of the lot, none saw the full full 4.25 percentage point cut made by the Reserve Bank. Conversely, the average rate cut in the mortgage sector of major banks was 3.80 percentage points.



David Bell, chief executive of the Australian Bankers’ Association said the gap in rate cuts between credit card and mortgages was influenced by higher funding costs and the higher risk associated with credit card debt. He further stated: “Generally speaking, interest rates on credit cards are usually higher compared to interest rates on home loans. This is because the home loan is secured against a property asset while a credit card offers a customer an unsecured line of credit, which is a riskier loan to make.”


A Canstar Cannex analyst said that banks were always protecting their assets when the economy was less than balanced. They (the banks) were adding layers of protection to secure themselves against unsecured credit card debts, e.g. high interest rates.


Banks are generally distinguishing between high and low risk credit card consumers. This can be seen by the way Westpac cut its Gold and Platinum Amex and MasterCard credit card interest rates. They fell by 3 percentage points to 17.74 per cent, whereas its student Visa card rate has fallen only a fraction, 1 percentage point to 18.45 per cent.


Usually the smaller the bank and credit union, the least likely they were prepared to give their credit card customers some financial slack.


Out of the nine cards that were hiking up their interest rates since September last year three were increasing their rates by 2 percentage points at a minimum. Those were AMP Banking’s AMEX Gold Credit Card (16.99 per cent), GE Money’s Low Rate MasterCard (now sitting at 14.99 per cent), and Intech Credit Union’s Titanium Visa 55 (11.55 per cent).


Suncorp spokeswoman Michelle Barry said: “Personal credit card portfolios are completely different scenarios to mortgages. It’s unsecured lending and it’s never really tracked against the Reserve Bank’s rates. It probably was more the case that it did seem to follow because the funding environment was so completely different 18 months ago.”


The double whammy comes as more and more consumers fear of losing their job in a shaky job market. Interestingly though, our credit card debt has shrunk for the first time since 1994.

Source:Business.smh.com.au


Perhaps it is time for the banks to cut us some slack and stop adding those exorbitant high interest rates? What do you think?