Interest rate cuts on cards

ONE of the nation’s largest credit card providers is slashing interest rates by three percentage points that will deliver customers huge savings and could result in others following suit.

American Express this week revealed it was dropping the interest rate on their lowrate credit card from 11.99 per cent to 8.99 per cent for both new and existing customers.

This is the lowest rate on the credit card market.

Interest rates have remained stubbornly high – many cards have interest rates higher than 20 per cent – slugging customers with huge charges if they fail to pay off their card in full each month.

Analysis by financial comparison website RateCity found on the average credit card debt of $4198, for customers only making the minimum repayment of 2.5 per cent a customer would save $802 in interest charges in total under the Amex interest rate changes.

It also means their card would be paid off one year and three months earlier than the estimated 11 years and one month.

RateCity spokeswoman Sally Tindall said Australians have continued to be slugged with “exorbitantly high rates on credit cards for years but the market is slowly shifting”.

“This latest move from Amex – one of the heavy hitters in the credit card space – breathes more fire on the competition,’’ she said.

“Low-rate cards are the new black.

“Last year we saw ANZ drop their rates while Westpac and CBA both put new low-rate cards on the table.”

Ms Tindall expects more lenders to follow and drop their credit card rates in the next 12 months.