ALP wants inquiry into credit card interest rates
(24 June 2015 – Australia) The Australian Labor Party (ALP)’s call to hold a parliamentary inquiry over credit card interest rates has been met with some resistance.
The ALP said it was concerned that the gap between historically low official interest rates and rates charged for credit cards was widening.
Some executives at the Reserve Bank of Australia (RBA) and the corporate regulator have also expressed concern about the issue.
The RBA’s annual review found banks made A$12 billion in fees in 2014, with credit cards shown as the strongest source of growth.
The central bank said this was due to the growing use of credit cards by both consumers and businesses and not due to higher fees.
Australian Bankers’ Association (ABA) chief executive Steven Münchenberg said; “This latest proposed inquiry follows on from numerous previous inquiries which have found that the banking industry as a whole - including the credit card market - is competitive.”
“In Australia, there is enormous choice for consumers, with at least 193 credit cards being offered by at least 67 financial institutions.
“The interest rate on bank credit card products covers a broad range - from a low of 5.30 percent to a high of 20.99 percent. Each credit card product offers a range of benefits - from no frills to premium options.
“Interest on credit cards is higher than it is for mortgages and some personal loans.
“This is because credit card lending is unsecured and therefore riskier. Banks need to factor in the risk that the person holding the credit card may default.
“The interest rate will also reflect the various features of the credit card. It is these considerations that drive credit card interest rates, not the Reserve Bank’s cash rate.
“With nearly 200 different cards available, and comparison websites helping people find what is on offer, it has never been easier for consumers to shop around and find the right credit or debit card that suits their circumstances,” he said.
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