Strict rules for low rate

CBA cops more flak over credit card practices

CREDIT card customers are being forced to switch to online statements and set-up direct debits just to get a competitive interest rate deal.

The nation’s biggest bank, the Commonwealth Bank, has quietly rolled out its cheapestever interest rate on plastic at 9.9 per cent but is coaxing customers to sign up to strict restrictions to reduce their monthly-account keeping charges from $5 to $2.

To do this customers must agree to receive online statements and set-up automatic payments to pay back the debt at either the minimum amount, set amount or the closing balance each month.

Spokeswoman for Financial comparison website Mozo, Kirsty Lamont, said banks were desperate to “win back customer trust” but there were cheaper card offers available.

“Credit cards are one of those areas where consumers have been pretty upset, with ever-increasing interest rates and fees,’’ she said.

“The Commonwealth Bank has introduced a card with an interest rate below 10 per cent ... but there are smaller providers with a lower rate.”

Westpac is the only other big four bank to offer a credit card rate below 10 per cent.

The cheapest credit card deal offered are by smaller lenders Community First Credit Union and Easy Street at 8.99 per cent but both have a $40 annual fee charge.

CBA has come under intense scrutiny this month at the banking royal commission over its handling of credit card insurance, after being accused of selling consumers worthless credit card insurance policies.

The commission was told more than a quarter of 245,000 income protection policies held by CBA credit card customers in 2015 were simply junk insurance that would never be used by consumers.

Consumer group Choice spokesman Tom Godfrey attacked the CBA’s credit card offering.

“This is a rather clumsy attempt by CBA to distract people from their appalling credit card practices revealed at the royal commission,’’ he said.

Mozo figures found on the average card debt of $4400 with an interest rate of 17 per cent, paying only the minimum of $25 per month would take a customer 16 years and four months to pay off the balance.

Latest statistics show Australians owe a whopping $51.5 billion on credit cards and more than $32.5 billion is accruing interest.