As the banks front a Parliamentary Inquiry this week to explain their poor practices, new research from CHOICE reveals their failure to pass on the official interest rate cuts to their credit card customers has cost consumers in excess of $3 billion.
"Although two of the big four banks have announced changes to their 'low rate' cards in recent weeks, it's clear the vast majority of credit card customers who carry a balance forward are being ripped off," says CHOICE's Head of Campaigns & Policy Erin Turner.
"Instead of falling in line with the cash rate, the average credit card interest rate has dropped only slightly since mid-2011 from 17.41% to 17.35%.
"If rates had moved in line with the cash rate, Australian credit card holders would have paid $3.49 billion less in interest since mid-2011.
"With consumers needlessly paying billions of dollars to the banks in the form of excessive interest, we welcome the opportunity the Parliamenty Inquiry provides to grill the banks on their poor practices."
CHOICE's research using data from Mozo has found although the Reserve Bank has cut rates by 3.25% since June 2011, Australian credit card holders have seen little to no relief in the form of cuts to credit card purchase rates.
"The failure of card providers to pass through cash rate cuts has levied an extra $220 in interest charges on the average credit card account with a $1,933 outstanding balance," Ms Turner says.
"It's concerning that even though ANZ have cut the interest rate on their "low rate" card, there is still a larger gap between the RBA cash rate and the ANZ interest rate today than in 2011. They may have a "lower" rate card, but they're still gouging consumers every other credit card product.
"The banks failure to put their customers first in this historical low interest rate environment doesn't bode well as we enter what could be a more inflationary part of the interest rate cycle.
"The sad fact is that many Australians live off a credit card to get through to payday and the banks seek to capitalise on this by charging excessive interest rates and making it difficult to exit these toxic products."
To support CHOICE's campaign for a fairer banking system, visit: choice.com.au/bankpetition
Tom Godfrey, CHOICE Head of Media: 0430 172 669