Time to take action
Credit card customers must snap out of their apathy to stop throwing away hundreds, writes Sophie Elsworth
UNSUSPECTING credit card customers are throwing away nearly $400 a year by failing to switch to deals with much cheaper interest rates.
Stubbornly high rates have continued to plague customers and apathy is getting in the way of consumers chasing down more competitive offers.
Reserve Bank of Australia (RBA) data shows cardholders have amassed $32.3 billion of debt that is accruing interest – an average of $4308 per person.
Analysis by financial comparison website RateCity has revealed that if Australians carrying this debt switched from a card charging the average rate of about 17 per cent to the lowest interest rate available of 7.99 per cent, they would save $388 a year in interest charges.
RateCity spokeswoman Sally Tindall urged customers to take action and hunt down more competitive rates.
“Customers so often focus on other features of a card such as rewards points and sign up to a card without even knowing what the interest rate is on balances owing,’’ she said.
“If you are someone who is not clearing your credit card every month then you should not be on a card that has an interest rate above 10 per cent. That’s handing money to your bank for free.”
Balance-transfer deals remain popular among customers who transfer debt from one card to another and enjoy a lower interest rate period.
To do this consumers should compare the deals available, apply for the new card that best suits them and include details of their existing card if they are moving debt across.
AMP financial planner Darren James said credit cards remained “easy money” for consumers and many didn’t bother reviewing the deal they were on. “In an ideal situation you pay your credit card off at the end of the month, but even at low rates of 8 per cent, it is still double what people are paying on their home loan,’’ he said. “The charges are still fairly hefty and if you are not in control of that, it does bite. “If your card is costing you a lot each year in interest, you have to weigh up the benefits.”