Plastic on chopping block for consumers

AUSTRALIANS are fed up with credit card interest rates and ready to cut up the plastic for good, a new study revealed.

A finder.com.au survey of 2004 people found one in 10 card holders are considering getting rid of them due to excessive interest, despite rates being at record lows elsewhere in the economy.

Around 16.7 million credit cards are thought to be in use in Australia, meaning 1.5 million may soon be binned.

Standard credit card rates have averaged above 19.5 per cent since 2011, despite the RBA lowering the official cash rate 12 times; from 4.5 to 1.5 per cent, finder.com.au spokeswoman Bessie Hassan said.

“Australians are better at paying off their credit cards and should be rewarded for this with lower interest rates,” she said.

RateCity statistics show only six out of 184 credit cards on the market have a rate below 10 per cent. Spokeswoman Sally Tindall said frustrated consumers have other options.

“Most transaction accounts give you the ability to pay via Visa, MasterCard and PayPal,” Ms Tindall said. “The main difference between a credit card and a transaction account these days is that a transaction account draws money from your own funds, rather than your bank’s so it’s harder to find yourself in debt.”

If you want to ditch your card but have money owing, Ms Tindall suggests transferring the balance owed to a different product, like a personal loan.

“They have relatively low interest rates and a structured payment plan that will see you debt-free within a set time frame,” she said, adding that personal loans were good for larger purchases that would otherwise need a credit card; like a fridge, or renovation.

“If you know you have trouble paying off debt, avoid the temptation of a zero per cent balance transfer card. Hopping from one card to the next is rarely the answer unless you have read the fine print carefully and are extremely diligent about paying it off (in the no-interest period).”