Credit card windfall

Banks collect $5.2b by failing to pass on interest rate cuts

GREEDY banks have raked in a whopping $5.2 billion in interest charges by failing to pass on rate cuts to customers.

And this includes an extra $864 million in the past year.

Since the Reserve Bank of Australia has gone on its downwards cutting spiral in the past eight years, the cash rate has plummeted from 4.75 per cent to just 1 per cent.

But in this time banks have barely budged on the interest rates they are charging customers who fail to pay off their plastic in full each month.

Analysis of the cards market by financial comparison website Mozo found the average credit card interest rate today is 17.1 per cent.

This compares to November 2011 when the rate-slashing cycle began and credit card interest rates were on average 17.55 per cent. So despite the cash rate falling by 3.75 percentage points since 2011, credit card interest rates have only dropped a minuscule 0.45 percentage points.

Mozo’s spokeswoman Kirsty Lamont said credit cards remained a “cash cow” for banks at the cost to customers.

“Customers are still stuck with sky-high interest rates and have been given little relief with being able to pay off credit card debt,” she said.

“The banks know when the Reserve Bank cuts rates the focus is on home borrowers and they know credit card rates go largely ignored so it’s very easy for them to keep rates jacked up.”

Latest RBA statistics found in May 2019 $50.9 billion was owing on credit cards and $31.2 billion was accruing interest.

The Australian Banking Association’s executive director of policy, Christine Cupitt, did not comment on banks not budging on rates but said they remained “fiercely competitive” in the cards market.

“Customers have a very wide range of options when it comes to credit cards with over 200 on the market, some with interest rates as low as 10 per cent and no annual fee,” she said.