Cards on table as RBA looks at high margins
FINANCIAL regulators are set to investigate the price of paying with plastic as the gap between the official interest rate and credit card interest rates hits record levels.
The move was foreshadowed yesterday at a Budget Estimates hearing by Malcolm Edey, the Reserve Bank’s assistant governor for the financial system, who said the gap seemed “high and it’s hard to explain why”.
An investigation is now expected to be considered at the next meeting of the Council of Financial Regulators.
Dr Edey was echoing earlier comments by Treasury secretary John Fraser, who said the gap was “well worthy of further deep investigation”.
“It does seem that the people who pay these credit-card interest rates … tend to be people less capable of servicing that debt and that worries me,” Mr Fraser said.
The cost of using plastic has not fallen since 2011, dur- ing which time the official RBA “cash rate” has been slashed by 2.75 percentage points.
While banks have not passed on all the cuts in their home-loan interest rate – including nearly 70 lenders that failed to pass on an estimated $127 million in savings to their home loan customers from the May rate cut – the gap between home-loan rates and the cash rate is much smaller.
Mr Fraser said while there were “similar histories” elsewhere, there were places where the “credit-card interest rate has moved down more in line with cash rate”.
Labor Senator Sam Dastyari told The Courier-Mail: “When both the RBA and the Treasury are telling us there is a problem, something needs to be done.”
The Australian Bankers Association would not comment.
The RBA meets today and is expected to keep the cash rate on hold at 2 per cent. WITH SOPHIE ELSWORTH