Bank bosses to get grilled again on sky-high credit card rates

The big banks are in for a roasting by MPs next Friday over the steep interest rates charged on credit cards.

ANZ, one of Australia’s largest banks, revealed on Sunday that it was cutting rates on two of its credit cards by up to 2 percent to as low as 11.49 percent a year, the lowest rate on the cards since 2003. The new rates will come in on Thursday.

But the move got scant praise from consumer advocates, who say the rates offered by Australia’s so-called Big Four – ANZ, the Commonwealth Bank of Australia (CBA), the National Australia Bank and Westpac – are still a rip-off.

Now, Scott Buchholz, the federal MP for Wright in Queensland, promises to hammer the banks on interest rates at upcoming public hearings.

The public hearings for the Review of Australia’s Four Major Banks by the government’s Standing Committee on Economics are due to start again on March 3.

Committee member Buchholz, who rapped the bank at last year’s hearings over “gouging” with “excessive” credit card rates, tells Starts at 60 that he plans to pick up the issue again at the upcoming hearings.

“The reason I was so dogmatic in questioning each banking boss of the specific issue of credit card interest rates was because this stuff is crucial for the families in my electorate of Wright and right across the nation – these people who rely on credit card debt to get them for pay cheque to pay cheque,” he says.

Although Labor has pushed for a royal commission into the banking sector, Buchholz backs Prime Minister’s Malcolm Turnbull’s decision to refuse such a review, saying that going over old ground wouldn’t benefit consumers as much as pushing for a fairer go for bank customers.

Meanwhile, Choice, the consumer advocacy group, says even with rate cuts of up to 2 percent, ANZ’s credit cards, as well as those offered by the rest of the Big Four, are a bad deal.

This is despite the Reserve Bank of Australia holding rates at a record low of 1.5 percent since last August.

CBA CEO Ian Narev told hearings of the parliamentary banking review last October that the bank had to balance the needs of borrowers and shareholders when it set rates.

But he conceded that there were products that “could probably be a bit more cheap,” according to reports at the time.

Fred Ohlsson, ANZ’s group executive for Australia, said on Sunday that the bank cut rates on some cards in response to customer feedback.

“These changes mean they will have the best rate available from any of the major banks or any of the regional banks owned by the majors,” he said.

But the cards ANZ cut rates on – its low-rate platinum card and low-rate classic card – are still considerably more expensive than the one Choice says is the best card on the market – the Community First McGrath Foundation card, which offers a rate of 8.99 percent.

“The fact is that they’re a long way from being the most competitive card when it comes to interest rates,” Tom Godfrey, a spokesman for Choice, tells Starts at 60.

“If you carry a balance forward each month, the only thing that matters is the interest rate, forget about rewards, and if you’re with the Big Four, you’re paying too much.”

Choice recommends checking out cards offered by credit unions, which all have rates under 10 percent. By comparison, some mainstream cards have rates as high as 20 percent.

Consumers can use comparison sites such as Choice itself, Finder, Comparethemarket or Canstar to check out how their card’s rate stacks up.

Do you use a credit card or do you avoid borrowing unless absolutely necessary? Do you regularly check you have the best rate? Are the big banks charging excessively high rates, or do they need to charge high rates to deter consumers from over-borrowing?