Card providers gorging on interest margins, research shows
(13 August 2004 – Australia) BIS Shrapnel research commissioned by new kid on the block Virgin Money shows that card providers are reaping the rewards of record interest margins.
The research set out to track interest margins by measuring the difference between the Reserve Bank of Australia’s official cash rate and the annual interest rates of ten major credit cards between June 1996 and June 2004.
The research found that movements in official cash rates had masked significant rises in credit card interest margins.
The report found that all cards surveyed increased their interest margin over the past eight years. American Express was top of this list with an overall margin increase of 3.79 percent.
Further, interest rates on major established cards are currently at similar levels to rates in 2000 and 1996, and on some cards are considerably higher despite the official cash rate sitting 0.75 percent lower than at June 2000 and 2.25 percent lower than at June 1996.
The report also found that providers have failed to pass on full reductions in the official cash rate and that average Australian cardholders were paying roughly $130 more each year in interest and annual fees than in 2000.
Virgin Money managing director, Rohan Gamble, said Australian credit cardholders were being squeezed on all fronts by "profit-hungry card issuers" and that cardholders were bearing the brunt of blatant annual fee increases, devalued rewards schemes and sustained margin creep on rates.
The research found that movements in official cash rates had masked significant rises in credit card interest margins.
The report found that all cards surveyed increased their interest margin over the past eight years. American Express was top of this list with an overall margin increase of 3.79 percent.
Further, interest rates on major established cards are currently at similar levels to rates in 2000 and 1996, and on some cards are considerably higher despite the official cash rate sitting 0.75 percent lower than at June 2000 and 2.25 percent lower than at June 1996.
The report also found that providers have failed to pass on full reductions in the official cash rate and that average Australian cardholders were paying roughly $130 more each year in interest and annual fees than in 2000.
Virgin Money managing director, Rohan Gamble, said Australian credit cardholders were being squeezed on all fronts by "profit-hungry card issuers" and that cardholders were bearing the brunt of blatant annual fee increases, devalued rewards schemes and sustained margin creep on rates.
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