Banks Accused Of Keeping Credit Card Interest High
Sydney Morning Herald
Friday March 25, 1988
CANBERRA: Australian consumers are paying $200 million more in credit card interest rates than they should because banks had ignored recent interest rate falls, according to the National Prices Network chairman, Mr George Gear.
Mr Gear issued figures yesterday comparing different interest rates which he claimed showed that banks had increased credit card rates while others had fallen.
He said the banks were contributing to Australia's consumer debt problems by forcing the rates up.
Credit card rates at the four major banks range between 21 and 23 per cent for cards such asBankcard.
Home loan rates are running between 12.5 per cent and 13.5 per cent while cash rates on the financial market are between 10.5 per cent and 11.5 per cent.
Mr Gear said the banks would receive between $500 million and $600 million in interest rate payments on credit cards this year.
"If rates on the cards had fallen by the same margin as general commercial loan rates consumers would save about $200 million," he said.
While most rates had been falling, Mr Gear said the Westpac Bankcard rate had been increased from 21 to 22.2 per cent while its Mastercard rate had risen from 16.8 per cent to 18 per cent.
"If the same reduction we have seen in the commercial rates had occurred in bank credit cardrates, the Bankcard rate would be about 14 per cent and the Mastercard rate would be close to 10 per cent," Mr Gear said.
"As I said, on current estimates that would put $200 million back into the pockets of Australian consumers, many of whom are stretched to the limit by these unconscionable charges."
Mr Gear's statement came on the same day as new Australian Bureau of Statistics figures which showed personal finance commitments made in January were $1,222.4 million.
This was an increase of $178.9 million on January last year although a fall of $573 million on the previous month.
The ABS said credit totalling $19.6 billion was available at the end of January with 46 per cent of the credit available being used.
A spokesman for Westpac, Mr Andy Conway, said yesterday credit card rates were high as banks had to cover all costs in the interest charge.
This included the cost of processing the card charges, running retail networks and communication costs.
A National Australia Bank spokesman, Mr Hayden Park, said consumer credit was the riskiest form of lending and the interest charges reflected the cost of covering the risk.
He said Mr Gear's statement was a selective use of statistics as credit card rates did not move with other rates. Some rates went up but credit card rates remained steady.
When Bankcard was introduced in 1974, the interest rate was 18 per cent and other interest rates ran at about 7 per cent.
In the United States, the credit card rate was 18 per cent while other rates were under 10 per cent.
In the United Kingdom, interest rates ran at 20 per cent while other rates ran at about 7 per cent.
Mr Park said the high interest rate reflected the inflation rate, the risk and the three-month notice period necessary for a rate increase.
© 1988 Sydney Morning Herald
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