Credit cards in price war

THE big banks are headed for an all-out war on credit card interest rates – but no matter who ends up on top, we’re set to be the winners, to the tune of $100 million a year.

The ANZ on Thursday will slash the interest charge on its low-rate “platinum” card from 13.49 per cent to 11.49 per cent – a level not seen since 2003 and up to 2.5 per cent beneath its chief competitors.

ANZ’s Australian head Fred Ohlsson said his rivals won’t take this lying down. “There will probably be a competitive response,” he said. “That will be good for their customers, too.”

ANZ, NAB, CBA and Westpac have a combined 80 per cent share of the low-rate cards market. If all moved to match ANZ, cardholders would save about $100 million a year in interest.

Nearly 500,000 Australians who have one of these ANZ cards in their purse or wallet will save an average $150 a year in interest, the bank said.

If, as expected, this triggers a battle among the banks, it will provide belated but welcome relief for the owners of the 2.3 million low-rate cards.

“Credit cards are an area where a price war could be likely,” said money expert Bessie Hassan of comparison service Finder. “Purchase rates haven’t dropped for years while the cash rate keeps on dropping.”

For nearly seven years, the industry-wide average interest rate on low-rate cards has been at 13 per cent or higher even though the Reserve Bank cash rate has fallen from 4.5 per cent to 1.5 per cent in that time.

The Sunday Territorian has obtained previously unpublished data from the Australian Prudential Regulation Authority revealing consumers paid banks more than $5 billion a year in credit card interest in 2015. About $32 billion of plastic debt is attracting interest, RBA figures show.

Mr Ohlsson acknowledged such a cut was “overdue”. Customers had demanded the bank do better, he said.

Choice spokesman Tom Godfrey said the consumer group welcomed the rate cut but noted there were still cheaper offers available from credit unions. Choice still believed there was an urgent need for a review into banking competition, Mr Godfrey said.

The so-called Four Pillars are desperately trying to avoid such a review – or a royal commission into their behaviour. So far the federal Government has resisted Labor’s campaign for a major public inquiry.

However, Treasurer Scott Morrison did ask a parliamentary committee to examine the Big Four. It was at the committee’s initial round of hearings in October last year that ANZ first flagged taking action on credit cards.

‘There will probably be a competitive response’