ACCC concerned by credit card interest rates
The gap between the cash rate and credit card interest has blown out to 18%.
Australian Competition and Consumer Commission (ACCC) boss Rod Sims says Australia's big banks are charging credit card interest rates "considerably above costs", despite the Reserve Bank's decision to cut the official cash rate to a record low 1.50% earlier this month.
Australia's major banks failed to pass on the rate cut to card holders following the RBA's decision, driving the gap between credit card rates and the official cash rate to 18%, the highest it's been in 27 years, The Guardian reported.
Bank of Australia was the only financial institution to pass on the full 0.25% rate cut to credit card customers.
However, most other banking institutions weren't as generous, given most credit cards have fixed rates rather than variable rates, meaning they're not directly tied to the RBA's cash rate.
Another reason big banks are unlikely to pass rate changes onto credit cards is that high interest rates are a solid source of profit.
The ACCC chairman says the disparity is something "that needs to be looked at", citing the Productivity Commission's upcoming review into the competitiveness of Australia's banking industry.
"Now, it may not just be a competition issue, in terms of entry barriers and how they manage to keep that market so lucrative," Sims told The Guardian.
"It could be something that needs to be looked at from the consumer side as well, like why are consumers so sticky [and don’t shop around for the best offer]?"
Comparing cards carefully is the best way to ensure you'll score a low-interest deal.
Australia's banks gave retirees and savers something to cheer about by raising term deposit interest rates.