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Banks snub plea on card fees

High rates: Australian banks snub pleas to cut card fees. Picture: Supplied

Australia’s banks, the world’s most profitable, have stared down Treasurer Joe Hockey by failing to cut interest rates on credit cards.

The Weekend West can reveal that since Mr Hockey demanded the banks cut credit card interest rates last month, not one of the big four have moved.

Consumers last month paid interest on almost $33 billion of credit card debt for 15.8 million cards. After the Reserve Bank’s move to cut in official interest rates last month, Mr Hockey demanded all banks not only pass on that cut to mortgage holders but also to people who have credit cards.

Figures compiled by Canstar show that just two small regional banks and two credit unions have made life a little easier for their credit card customers. The Intech Credit Union cut the rate on its Titanium Visa 55 by 2.31 percentage points to 9.99 per cent.

The ANZ, Commonwealth, NAB and Westpac, which dominate the card market, have all maintained their credit card charges.

Despite the cost of credit globally falling to all-time lows, Australian banks have actually increased interest costs on people with credit cards.

In late 2007, when the official cash rate was 6.5 per cent, the average interest rate on all credit cards was 14.51 per cent.

Today, with the Reserve Bank taking rates to their lowest level on record, the average interest rate is 17 per cent.

Canstar’s Justine Davies said some people were paying as much as 23.5 per cent on their credit cards.

“Even on an average rate of 17 per cent a $5000 debt could be costing a few hundred dollars more per
year than it needs to,” she said.

Mr Hockey warned last month that he would be “following up” with individual banks to ensure they were passing on the cut in official rates to small business loans and credit cards.

It caused surprise in the banking sector at the time as interest on credit cards, an unsecured form of debt, has traditionally not been linked to the Reserve Bank’s benchmark interest rate.

A spokesman for NAB said there were a number of issues at play with credit cards.

“NAB never takes decisions on rates lightly and has to consider a range of factors including our customers, our shareholders and the broader economic environment,” he said.

A spokeswoman for Westpac said there were a variety of credit cards available, including ones with low rates, and customers could avoid interest by paying off their balances.

“At Westpac, we regularly review the rates on our credit cards, irrespective of changes to the official cash rate,” she said.

A spokeswoman for Mr Hockey said there had been a fall in rates on low credit cards following the Reserve Bank’s decision, the first since the middle of 2013.

“While it was positive to see some banks and financial institutions passing on the full cash rate reductions, there is still room to improve, especially for small business loans and credit cards.”