16 October 2015
Consumer group CHOICE is proposing reforms that would make banks redesign credit card statements so consumers can identify the true cost and value of their cards.
"If a consumer can access a cheaper product from their current bank, potentially saving them hundreds or thousands of dollars in interest, we think they should be told about it," says CHOICE Campaigns Manager Erin Turner.
"That's why we're urging the Senate Economics Committee to help consumers cut through the deliberate confusion of these products.
"Credit cards are high cost forms of debt, with extreme interest rates often obscured by rewards programs of dubious value.
"While the banking industry regularly points to the low-rate cards on the market, the simple fact is too many consumers are paying way more than they should for high-rate cards.
"For example, our research found that none of the major banks have a credit card in the top 20 for low interest rates, yet around four in five people have a credit card with them.
"There should be no objection to providing simple, clear information on the true costs of credit cards, and help people find products that best meet their needs," Ms Turner says.
The call comes as the major banks appear at a hearing of the Senate Committee today as part of the ongoing inquiry into matters relating to credit card interest rates.
To help solve the problem, CHOICE has created examples of credit card statements and advertisements that identify the true costs of these products, and has called for the Senate Committee to take up the challenge.
"Currently, there's no requirement for statements to include prominent information about major costs like annual fees or interest rates, or to put 'rewards' in context," Ms Turner says.
CHOICE is calling for:
- Credit card advertising to provide a simple cost comparison with an 'average monthly cost' figure based on fees and interest payments on an average balance.
- Credit card statements to include information about how much consumers would personally save if they switched to the provider's cheapest card, including any card offered by a sub-brand.
- Credit card statements to include information about the lowest interest rate in the market as identified by the RBA.