Since the Reserve Bank of Australia (RBA) has cut interest rates in the past eight years, Australia’s cash rate has plummeted from 4.75% to only 1%. However, during this time, the interest charged by the bank to customers who failed to pay their credit card loans in full was almost unchanged. An analysis of the Australian credit card market by the financial comparison website Mozo found that the average interest rate of Australian credit cards is currently 17.1%. Since the beginning of the interest rate cut in November 2011, the average interest rate on credit cards has been 17.55%. Therefore, although the current cash rate has dropped by 3.75 percentage points since 2011, the credit card interest rate has only dropped by 0.45 percentage points. Mozo spokesperson Kirsty Lamont said that the credit card business is still a banker’s cash cow, but credit card customers have paid a huge price for it.
“The consumer still needs to pay a higher interest rate,” she said. “The bank knows that when the Reserve Bank of Australia cut interest rates, people are focusing on homeowners who know that credit card rates are largely ignored. So they can easily set a higher credit card rate.” The latest statistics from the Reserve Bank of Australia show that in May this year, Australian credit card arrears totaled 50.9 billion yuan and interest was 31.2 billion yuan.
Christine Cupitt, executive director of policy at the Australian Banking Association, said: “There are more than 200 credit cards on the market, and customers have a wide range of options. Some credit cards have interest rates as low as 10% and do not charge an annual fee. Credit cards may be suitable for different customers, some customers want frequent flyers, and some customers just want a low interest rate.” In other countries, including the US, credit card rates have remained high, about 15%. In 2011, the cash rate was only 0.25%, and the average interest rate of credit cards was about 12%. The Australian Securities and Investment Commission also imposed new restrictions on credit card loans in 2019. The lending institution must evaluate the credit card limit based on the client’s ability to repay the debt within three years.
