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New analysis has found Australian banks have pocketed $6.3 billion* over the last decade by failing to pass rate cuts onto credit card customers.

“By failing to pass rate cuts on for credit cards, banks have effectively stolen $6.3 billion dollars from the pockets of Australians,” says CHOICE CEO Alan Kirkland.

“While the cash rate has dropped from 4.75% from 0.25% since 2011, credit card rates have remained stubbornly high. Some banks – including ANZ, Bendigo, and St George –  have even increased rates on credit cards. This is disappointing behaviour from an industry looking to restore trust after the scandals of the Banking Royal Commission,” says Mr Kirkland.

“For many people, lower credit costs would have saved them from falling into a debt spiral and facing years of unnecessary hardship,” says Mr Kirkland.

“Banks have cut interest rates on mortgages as the cash rate has fallen. There’s no justification for failing to do the same for other credit products, especially now so many Australians have lost their job.”

CHOICE is also warning Australians about the banks that have lifted credit card rates up as their costs have gone down.

“If you’re unimpressed with the interest rate your bank is charging, you should vote with your feet. Cancel your current credit card and switch to a bank with a lower-rate card. This will send the loudest message to the banks that they need to treat their customers fairly,” says Mr Kirkland.

CHOICE’s Make Banking Fair campaign continues with the consumer advocate today launching a crowdfunding campaign to fund a national advertising campaign calling on banks to do better. Australians can join the campaign here.

The twelve cards with the biggest increase in interest rates since 2016

A Bendigo Bank spokesperson said:

“The analysis cited compares two different products.  Since launching, our Mastercard Platinum Rewards product has not had its rate increased.

“Credit cards are unsecured lending products and feature higher operating costs and higher risk than fixed term, secured lending products such as mortgages. As funding costs represent a smaller portion of our cost base, there is less direct correlation with the RBA cash rate.

“We offer several low interest rate credit cards for customers who have the ability to easily switch products to suit their individual needs at any time. Our cards are highly competitive and represent clear benefits for customers whose interests we seek to balance fairly and transparently in combination with the prudential requirements of operating a bank.

“Over half of our customers pay their entire credit card balance in full each month – and pay no interest – and more than 60 per cent of customers currently hold our low interest rate products in the event they do wish to borrow and not repay in full.

“In recent years, the Bank has proactively moved more than half of its credit card accounts to a lower purchase rate product as a part of our new product suite designed to better suit our customer base.

“Bendigo Bank also has several initiatives in place to ensure responsible provision of credit such as requiring new customers to select their preferred credit limit, rather than automatically receive the maximum limit.  Bendigo Bank has historically not engaged in broader credit card industry practices which are now banned by legislation, such as proactively offering credit limit increases and retrospectively charging interest on balances which have received an interest-free period.

“Bendigo Bank was also the first Australian financial institution to offer customers a debit card as an alternative to the use of a credit card”, the spokesperson concluded.

Provider name

Name

Rate at 1 April 2016

Rate at 19 May 2020

Change

Coles

Low Rate MasterCard

9.99

12.99

3.00

ME

frank Credit Card

9.99

11.99

2.00

Police Credit Union

Extralite Credit Card

11.99

13.99

2.00

ANZ

Rewards

18.79

20.24

1.45

ANZ

Rewards Black

18.79

20.24

1.45

ANZ

Rewards Platinum

18.79

20.24

1.45

Australian Military Bank

Low Rate Visa Credit Card

10.99

11.99

1.00

Bendigo Bank

Platinum

18.99

19.99

1.00

Bank of Melbourne

Vertigo

13.24

13.99

0.75

BankSA

Vertigo

13.24

13.99

0.75

Citi

Prestige

20.74

21.49

0.75

St.George

Vertigo

13.24

13.99

0.75

Source: Mozo (19 May 2020)