Senate inquiry accuse banks of capitalising on consumer inattention

Information verified correct on December 4th, 2016

Senate inquiry reveals that credit card providers are exploiting “consumer inattention” to keep interest high. Discover how you can keep your interest costs to a minimum.

Figures from the Australian Prudential Regulation Authority showed a 70% increase in the cost of using a credit card in September 2015. As reported by news.com.au, national credit card costs have risen $2.3 billion dollars in ten years, increasing from $3.1 billion in 2004 to $5.4 billion in 2014. This massive growth prompted the Senate inquiry on 22 September 2015 that set out to determine how this growth occurred and where it can be reduced.

During the inquiry, Treasurer Scott Morrison argued that providers exploit consumer ignorance and express what cardholders realised long ago - that credit cards interest rates are a rip off.

Here we spell out what was uncovered at the Senate inquiry and how you can take action to ensure you’re not duped by high interest rates.


What happened at the Senate inquiry?

In the week prior to the September Senate inquiry, the Australian Prudential Regulation Authority figures demonstrated that there was a significant gap between the Reserve Bank of Australia’s (RBA) falling cash rate and the increasing interest rates on credit cards. At the inquiry, Labor senator and inquiry chairman Sam Dastyari also pointed out that while secured debts such as home loan rates decreased as the RBA interest rate did, credit card rates continued to rise. Treasury deputy secretary Michael Willcock argued that the gap between the RBA’s interest rate and credit card interest rates “seems to incorporate a premium reflecting consumer inattention”.

Morrison argued that credit card providers took advantage of consumer’s ignorance of these falling rates, continuing to charge higher rates to make a profit. Following the inquiry, Independent senator Nick Xenophon also informed reporters that credit card providers are making record profits and causing a subsequent record-breaking level of national debt, stating that it was time for a reform.

How can I protect myself from rising credit card costs?

While increasing credit card interest rates have had an impact on Australia’s current $51 billion credit card problem, you can empower yourself to make smarter financial decisions that will help reduce your debt burdens.

  • Low rate cards

    If you struggle to repay your balance each month, a low rate credit card could help keep your interest costs to a minimum. While these cards may not offer too much by the way of extras, if you’re only using your card to make essential purchases then it could be a good way to repay your debts quicker and at a lower cost.

  • Balance transfers

    If your debt is building up thanks to high interest rates, a balance transfer could be the strategy for you. Take advantage of a promotional balance transfer deal (such as 0% p.a. for six months) and repay your debt quicker with a reduced interest rate. Keep an eye on the length of the introductory offer though, as the promotional rate will be replaced by a much higher revert rate at the end. The revert rate is usually the standard cash advance or purchase rate, so you’ll want to pay your balance off before this rate kicks in to avoid counteracting any savings you’ve made.

  • No-frills cards

    While most credit card perks seem appealing, the extra cost may not be worth it. Cards that come with rewards programs, complimentary insurance offers and concierge programs (among other benefits) usually come at the cost of higher fees and interest rates. If you only use your credit card for the necessities and struggle to repay your balance in full each month, a no-frills card with lower rates could help keep your credit card costs to a minimum.

  • Consider all of the fees and rates

    Many credit cards lure new customers with the promise of a $0 annual fee or low or no interest rate offer for the first few months. While these offers can be beneficial, make sure you compare the other costs associated with the card before submitting your application. For example, some low interest cards may make up the cost with a higher annual fee. In this case, you’ll need to make sure that your interest savings counteract the yearly fee to ensure the card is of value to you. These fees are available in the relevant Product Disclosure Statement, so make sure to browse this and compare your options before making a final decision.


With interest rates and overall credit card debt at an all-time high, there is no better time to compare your options and make smarter financial decisions. While a reform could reduce financial burdens, you can keep your credit card costs to an absolute minimum by comparing your options in conjunction with your spending habits and financial needs. By doing so, you can ensure that you’ve chosen the most suitable and beneficial card for you.

What you need to know about the credit card Senate inquiry 

Sally McMullen

Sally McMullen is a journalist at finder.com.au who is a credit cards, frequent flyer and travel money expert by day and music maven by night.

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