4th Feb 2015
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CHOICE calls on banks to be fair
CHOICE calls on banks to be fair

Consumer advocacy group CHOICE has called on the big four banks to pass on the benefits of the latest interest rate cut to their credit card customers as well those with mortgages. 

“The big banks will be making announcements about the impact of this rate change very soon. They’ll have a lot to answer for if, like they have many times before, they fail to pass on expected reductions to credit card customers,” says CHOICE Head of Media Tom Godfrey. “With official interest rates at record lows, it’s staggering to think the big four banks are still punishing consumers with credit card interest rates in excess of 19 per cent per annum.”

Even with the Reserve Bank of Australia’s (RBA) cash rate cut, many major banks, including ANZ, Commonwealth Bank, NAB and Wetspac, still charge around 20 per cent annual interest on credit card balances. CHOICE advises consumers that now may be a good time to scrutinise the financial products that they currently have in place.

CHOICE also recommends that customers ignore all the ‘bells and whistles’ that may distract them from the credit card’s very high interest rates. These ‘distractions’ include rewards schemes, interest-free periods, balance transfers and low annual account fees.

“The major banks’ low-rate cards are worth considering, but with the most competitive of the lot only offering an interest rate of 13.24 per cent per annum, they are still a long way from the best deals on offer,” says Mr Godfrey.   

If banks were to pass on the benefits of the latest rate cut, it may come as a welcome consolation to many – especially to those trying to find some ways to compensate for retirement shortfall, or at least cover monthly expenses without suffering from late-payment penalties.

Would lower interest rates on your credit cards help you through the tough times ahead? How much more will you become reliant on your credit cards, considering the possible loss of earnings as a result of the RBA’s cut? Do you know of any credit cards that have attractive low annual interest rates? Why not share your knowledge?





    COMMENTS

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    Jurassicgeek
    6th Feb 2015
    9:31am
    banks never play fair...never will!..they are there just to make money for their shareholders...
    particolor
    6th Feb 2015
    9:40am
    What's She hesitating for ? Cut It !! :-)
    Tim@toc
    6th Feb 2015
    9:45am
    Try Members Equity Bank
    LOW RATE CREDIT CARD. FREE YOURSELF FROM ANNUAL FEES.
    What’s in a name? In this case, everything – our Low Rate Credit Card is just what it says it is. With no annual fees, up to 55 days interest free on purchases* and a low, low interest rate, this card gives you room to roam. Low variable interest rate. 9.99% p.a. Interest rate for purchases and cash advances^ http://www.mebank.com.au/personal/credit-card/low-rate-credit-card/
    Tom Tank
    6th Feb 2015
    11:44am
    I agree an excellent bank which was originally setup with Trade Union support but it now independent in that it is not necessary to be a union member to take advantage of its excellent service.
    Helen-gran
    6th Feb 2015
    9:49am
    When will the "financial gurus" admit that a credit card debt is an unsecured loan and as such, should have a much higher interest rate! Your home is security against your mortgage, hence the much lower rate.
    Wstaton
    6th Feb 2015
    10:06am
    Yep credit cards are unsecured, so why aren't they at the same rate as other unsecured loans. You can get them as low as 9% going up to 14 and bit percent.
    particolor
    6th Feb 2015
    10:25am
    Get one off the Reserve Bank ! 2 and a Quarter % !! :-)
    wally
    6th Feb 2015
    11:02am
    I got rid of my bank 20 years ago and have been with a credit union which fulfils all my banking needs. "Vote with your feet." Close bank accounts and switch. It is worth all the trouble.
    PlanB
    6th Feb 2015
    12:37pm
    Credit unions have not as good interest rates as --the ANZ --even though interest has just gone down I still get 3.35% ON CALL
    Hawkeye
    6th Feb 2015
    12:51pm
    Make just one payment a month, never pay interest, and have the banks pay you for the privilege of using their money.

    Beat the banks at their own game by sticking religiously to the following:
    - Don't worry about what the interest rate is.
    - Get a card with "free-days" (any amount) so no interest is ever charged if the full amount is paid off each month.
    - Get the free-days card with the best reward points system that you can find (never fly-buys).
    - Use the card to pay for everything you possibly can, to maximize points accumulation.
    - Pay off the full amount each month so no interest is ever charged. (If you can't afford to do this, then you are spending beyond your means and should never consider getting a credit card in the fist place).
    - Even with large purchases, like a car, use the credit card to get the points, then use cheaper money to pay off the credit card if required.
    - Use your accumulated points to claim cash rewards only.

    I have been using this system for many years and have received many thousands of dollars from the bank over that period. I have an automatic payment set up to pay off the full credit card balance on the due date each month, to ensure that I never pay interest, and I claim a $100 cash back reward approx every 2-3 months.
    Meanwhile, the cash that I would have been spending during that month is sitting in a high daily interest account until required to pay off the credit card.
    My bank has a dual AMEX/VISA account, where use of the AMEX card gives 3 times as many points as using the more widely accepted VISA card, so if a retailer does not accept AMEX then I simply use VISA.
    Sceptic
    6th Feb 2015
    1:06pm
    If I had seen your post first Hawkeye, I would not have bothered to post (below). You have said it all.
    KSS
    6th Feb 2015
    3:06pm
    Exactly what I said yesterday Hawkeye. Along with stop any brand loyalty. Shop around for the best deal that works for you, use on-line banking high interest accounts as well. I totally agree with you, I have never paid bank fees including fees they charge when there is no DIY option forcing you to go into the branch and have them do it for you. I simply complained and they waived the fee.
    Sceptic
    6th Feb 2015
    1:02pm
    Why worry about the credit card interest rate. Live within your means and only use the available credit until the payment is due, then pay the full amount.

    No wonder people are comfortable with a federal debt that requires borrowings of $110 million per day just to service the national debt and to finance the current deficit, when they are comfortable to live on credit. Just think how bad things will be with all of that debt when the interest rates start to rise, as they inevitably will.
    KSS
    6th Feb 2015
    3:08pm
    Agree Sceptic. If people are happy to live beyond their means, they will see no issue with Australia doing the same.
    mangomick
    6th Feb 2015
    1:51pm
    I'm the first to say that people really need to live within their means but I've got to smile when people say that banks have to make money for their Shareholders. Well how about a fair shake for Depositors. Something wrong when they give you 2.5 % interest on your deposits when some of that money is being used to collect the bank 19% or more.
    I realise Banks bad debts are going up but maybe they wouldn't if they were prepared to accept a reasonable return for the risk they undertake. High bad debt is an indicator that Banks never learnt anything from the Sub Prime loan saga.
    particolor
    6th Feb 2015
    3:09pm
    Yes they did ! Don't lend money to Tramps !! :-)
    Hawkeye
    6th Feb 2015
    4:05pm
    Credit cards should NOT be looked on as a loan.
    They should be looked at as only short term (3 to 4 weeks) credit to enable purchases without needing to carry hundreds of dollars of cash with you.
    They should be paid off completely by the due date or you will be punished (rightly or wrongly) with punitive interest charges.

    That's what they do. Accept it and work around it to your advantage as per my post above.

    Choice's recommendation is wrong!!!! It's the "bells and whistles" cards that provide the options to use the cards against the banks to come out ahead.
    particolor
    7th Feb 2015
    7:51pm
    I applied for one of them and they sent Me a Wedding Invitation and Picture of a Canary ?? :-)
    Hawkeye
    6th Feb 2015
    4:47pm
    A good way to obtain cheap loans for life =>

    While you still have a mortgage on your home, open a "home equity" type loan. The type that gives you an account with a credit limit and allows you to withdraw/repay any amount at will (up to that limit) at very close to home mortgage interest rates. Works much like a credit card but without the card, and at much lower interest rates.
    Then, when you pay off the mortgage, keep the home equity loan in place, even if the balance is zero. You then have access to that money as a cheap loan whenever you may require it.

    This has come in handy many times, such as;
    - when the kids need to borrow money without disturbing my investments (I make the kids pay the interest too)
    - pay off the credit card when used to buy a car or other large items
    - pay for a cruise temporarily for a couple of weeks until the term deposit matured

    It's cheap money for any reason that may arise, so I reckon its another way to beat the banks at their own game.
    Abby
    7th Feb 2015
    4:59pm
    Thanks for the most informative info Hawkeye
    vincent
    7th Feb 2015
    7:34pm
    Hawkeye is right, just treat your credit card as cash. If you don't have it don't buy it. If it looks as van impulse buy just resist and have a look at it the next day. If you still need it make a decision then. Pay the lot of when it is due.A lot of the problems occur with people who are earning medium incomes and buying on payment terms instead of waiting till they have the dough.Keeping up with the johneses Instant gratification is the problem here. In other words the problem is self inflicted, I had a bloke working for me who never could make ends meet. This was 1985, I checked trough the records and he made $ 70.000 that year.
    So I asked for his credit card and cut it in two and told him to take the card of his missus as well and do the same thing. He never looked back after that, point taken
    Paulodapotter
    7th Feb 2015
    11:35pm
    Calling on the banks to pass on the interest rate cuts is like asking God to control the weather. They do what they like for the same reason dogs lick their bottoms. It's because they can.

    Banks are now so powerful, they can do what they like when they like. Once it was the church who were the most powerful and they built awe-inspiring cathedrals to keep the meek bending to their will. Now the biggest buildings are owned by banks who do the same thing. And what do we all worship? The Holy Dollar of course. Are you a believer?
    particolor
    8th Feb 2015
    9:37am
    I believe for every drop of rain that falls
    A flower grows !!


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