Why don't credit card statements get to the point?
Wouldn't it be good if credit card statements and advertisements focused on the information you actually need to know, such as interest rates, annual fees and how much your rewards points are really worth? And maybe even pointed you toward the best deal on offer from the credit card issuer? Is that too much to ask of highly profitable institutions like ANZ, Commonwealth Bank, NAB and Westpac?
CHOICE thinks this is exactly what banks should be doing, which is why we're calling on the Senate Economics Committee to take a hard look at the confusing marketing posing as 'helpful information' that's rampant in the credit card industry as part of its inquiry into credit card interest rates.
At the moment there's no requirement for credit card issuers to be upfront about the real costs of the card. Instead, the banks tend to push 'low rate' cards that are anything but, and focus on rewards points that look a lot less rewarding once you do the maths.
Their tactics seem to be working. Four out of five Australian consumers have a credit card from one of the big banks, even though there are much better deals available with smaller financial institutions.
Big bank cash grab
There's a reason the big banks have been cagey about credit cards interest rates. As we reported earlier this year, interest rates on ANZ, Commonwealth Bank, NAB and Westpac low-interest credit cards have moved by less than 1% over five years, with most rates increasing from 2013. Over the same period the cash rate dropped by a whopping 2.75%.
And those are just the so-called 'low rate' cards. Standard and rewards credit cards from ANZ, CBA, GE Money, NAB and Westpac still charge exorbitant rates.
A true low-rate card would charge 10% interest or less, a far cry from the average of 18.98% charged by the big four banks.
If credit card advertising and statements are anything to go by, these are the things the credit card industry doesn't want you to know.
What CHOICE wants
- Credit card advertising should provide a simple cost comparison with an 'average monthly cost' figure based on fees and interest payments on an average balance.
- Credit card statements should 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 should include information about the lowest interest rate in the market as identified by the RBA.
What would clearer credit card statements look like? Download the standard statement and then, for comparison, the improved, clearer statement below.