The sixth consecutive drop in interest rates begs the question: why haven't credit card rates come down?
Since September 2008 the official Reserve Bank cash rate has fallen a total of 4.25%, from 7.25% to 3.00% - the lowest in almost fifty years. Interest rates on mortgages have coincidingly dropped amidst calls for banks to pass on the rate cuts in full. However interest rates of credit cards have remained steady.
According to infochoice.com.au, the average purchase rate on a sample of 121 credit cards has fallen only slightly (from 16.53% to 16.04%) since the first Reserve Bank cut in September 2008.
But most economists agree we shouldn't hold our breath waiting for credit card rates to follow. The discretionary nature of credit card spending means they aren't subject to the same scrutiny as mortgages. Many analysts also blame the financial crisis and the high costs of credit. Some have even alleged the high credit card rates are being used to subsidise any reduction in home loans.
In the meantime, consumer groups are encouraging credit card holders to do their research and opt for budget, no-frills credit cards (see our suggested list at the end of this article).
Tell us what you think below. Should banks pass on rate cuts to credit cards?
Suggested Cards
