$6.4 billion credit card rate ‘rort’

Credit card providers have pocketed $6.4 billion in profits over the past eight years by failing to pass on official interest rate cuts, according to financial comparison site Mozo.

As bank interest rates on deposits have plummeted in response to the Reserve Bank’s lowering of the cash rate – now at a historic 0.10 per cent – cuts have not filtered through to credit card interest rates.

“The failure to provide rate relief to credit card customers after the RBA cuts the official cash rate has become a bad habit and a multibillion-dollar business,” says Mozo director Kirsty Lamont.

“Although we have been conditioned to thinking credit card providers will not pass on official interest rate cuts, it’s encouraging to see one provider (Auswide Bank) take the opportunity to put their customers first.

“At a time when credit card providers are faced with increasing competition from buy now-pay later services, something as simple as providing interest rate relief could be the difference between retaining customers or not.”

Mozo found that while $20 billion worth of credit card balances were accruing interest across the country, that figure was down 46 per cent compared with a high of $37.1 billion in 2012.

Mozo says the average credit card interest rate is 16.39 per cent and that the gap between the average credit rate and the average cash rate has widened significantly since 2011, increasing from 12.94 per cent to 16.29 per cent.

“If your card provider hasn’t cut your interest rates and you’re carrying a balance forward, it’s worth comparing interest rates and switching to the best rate you can find,” Ms Lamont says.

6 comments

Banks are all a pack of "rip off" Bastards, just like the Energy Companies. 

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Much to my disgust our ex-bank kept giving my ex-husband increased credit limits on his credit card.  The bank manager  would NOT discuss this with me as the credit card was not in my name.  BUT the bank was using my joint equity in the family home to increase the card limit to well over $20,000.   Ex-husband would withdraw cash advances.  Yes this is top top interest rate charged for cash withdrawals.    Final result ..  family home sold ..  bank recovered their money from underpaid home loan payments and also from $100,000 advance and credit card unpaid debt.   Do I trust banks.  Not at all.

Did the expensive Banking Royal Commission benefit any normal struggling family?  Not that I can see.

Very sorry to hear about your devastating experiences My Choice Adelaide.

My Choice Adelaide, from what you say it seems you were trying to interfere in a situation that had nothing to do with you. He was your EX husband, you were not a beneficiary/signatory of the card so why were you seeking anything from the bank? You are not responsible for your EX husband's actions.

In this case, the bank was right to ignore you.

 

My apologies ..   we were married during this bank fiasco ...  our marriage broke down mainly because the bank kept giving my husband at the time as much credit as he applied for.  Using our joint equity in our family home.  The marriage fell apart the family home was sold and the bank of course got their money FIRST.  The only winner was the bank.  They will keep giving as long as there is equity in assets.

 

I feel for you My choice,   banks are very good at this and if someone is the type that doesn't handle the card the right way they will pay dearly for it as the interest rates are beyond a joke -- but I have known banks to push credit cards onto people knowing they had no assets too why I can not understand?

 

The only way to have a C/C is to pay it off before time and never take cash advances

I am surprised the Family Court did not step in long before that, they do often take the interested party away from the Title, which sounded what you needed to be done.    

Women should never go through this, if anyone is reading this now in a similar situation go to see a Lawyer and get the Bank sorted out asap.

Sorry situation, now reader's  can probably agree with my first post?

The Reserve Bank estimates Australia’s banks makes a staggering $21million a month  ($252 million per year) on cash advance fees plus at minimum about  $61 million interest on the cash advance fees

One can transact a credit card purchase for a roll of toilet paper online  and it is not deemed as a cash advance but when you buy a paper lottery ticket online (...to wipe your arse with ...so to speak...) it is deemed as cash advance and charged a $2.50-$3 fee for each transaction plus interest on the fee that is included in the sum total of the monthly balance. 

During the Covid-19 isolation period of 9 or 10  months many Newsagents /Lotto providers were closed so one had no choice but to buy lottery products on line by credit card. Although the lottery office provided the services of Pay-Pal at a lower cost, the length of time of getting winners funds into ones bank account took weeks. This is not acceptable ! 

Make sure you’re doing everything you can to minimize your contribution to credit card cash advances ! 

 

Some people take out cash advances on credit cards before they enter the pokies clubs, ATMs in there do not give out cash, only Eftpos and Debit cards are usable. You can pay for meals and drinks on credit but no access to cash

Arvo, you DO NOT need to use a credit card to buy lottery tickets online.  You use a DEBIT card or funds transfer which attracts NO fees.  I just top up my Tatts account with my debit card when the balance is running low.  As I rarely win anything, I leave what winnings I get in the account to pay for my weekly $3 ticket and the occasional quickpick when there is a jackpot prize.  I only play 4 games in Saturday's lotto draw.  That's more than enough gambling for my risk profile.  I reckon I can afford to lose $3 a week as I don't go out for $4 coffees like many people.  Playing lotto might bring me riches one day, coffee, which I don't drink anyway, would never give me anything. 

I only use a credit card as a spare back-up to a debit card (in case it's lost/stolen), paying it off withing a month.

Luckily to date after 20 years, I have paid no interest or fees on either.

Agree the profit amounts as outlined by Arvo are staggering.

As do I and will never use credit cards when other options remain available.  Not 1 cent interest from me in 20 years to assist with their obscene profiteering!

 

I use a C/C all the time rather than my own card -- as if it is hacked --  like it was at one time ---    I got the lot back,  whereas if it had been my own card I may not have.

I always pay before time and treat it like cash  (not spending more than I can afford to pay back)

 

I have never been late or paid interest in many decades

 

 

We always use a credit card, as a Ledger and never pay a cent to use the card.

Payment has to be cleared out at the end of each month.

 

 

We keep hearing how much the banks are making from credit card interest rates yet these are some of the easiest charges to avoid. Pay the full balance each month and there is no interest to pay. And if you can't afford to pay the entire balance, you can't afford to have the card in the first place.

I have never ever paid interest on any credit card in 40 years!

Neither have I, got my first card in 1978 (Bankcard); could only be used internally in Australia and it suited me fine at the time, did not go overseas then for another 15 years. Today I pay $30 per year for the cheapest card available in my area, no bells and whistles, rewards, insurances etc. Most bills still paid by cash (or Eftpos) at the local post office. Have to go there every few days as we have a post box.

Look harder, Mariner, there are fee free card options available so you can save even the annual $30.

Probably right Buggsie but there might be conditions attached to them, like no branch banks, internet only etc. Or fee free with a total spend of so many thousands per year. I think Coles used to have one of those but I do not see the brochures any longer. Also used to have a reloadable Eftpos Card which was handy but that also went away. I shall keep my eyes open.

I have used a credit card for virtually all my day to day purchases for many years and treat it as if it were cash by keeping track of my spending. I have never paid interest. I have found it to be extremely convenient and will continue to use it in this way.

When my wife and I have gone overseas we use our debit card to withdraw cash from ATMs but use our credit card for purchases were possible. We are careful in doing this and it is the cheapest way to pay for goods etc and we have never had a problem over many years.  

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