Savers across the country held their breath this week as they awaited the latest announcement from the Reserve Bank of Australia, after the cash rate took a steep nose dive to a historic low of 1.00 per cent in June and July.
To the relief of many, the RBA decided to hold the cash rate steady on Tuesday, however Governor Philip Lowe hinted that further reductions may be necessary and reiterated that an “extended period of low interest rates” is essential, as the central bank continues to monitor the effect of the recent consecutive cuts on the Aussie economy.
The sudden drop in rates – first from 1.5 to 1.25 in June, then again by a further 25 basis points in July – left many Aussie savers, as well as retirees who rely on term deposits as a source of income, concerned about the cash rate reduction. Meanwhile prospective first-time buyers and homeowners lapped up the offer of low rates on their home loans.
However, lower interest rates were not dished out by all banks and financial institutions equally and, despite the cash rate remaining at just 1.00 per cent, the majority of credit card interest rates were not lowered in line with the RBA’s decision as just 8 out of 65 providers passed on the lower rates.
Now experts have warned that thousands of credit card customers will soon be faced with a sharp rise when it comes to the interest they pay, as two of the big four banks have recently announced rate hikes.
In May, Westpac raised interest rates for the majority of their credit cards by 0.25 per cent, while ANZ recently revealed they will be increasing the purchase rate on most of their offerings by as much as 1.45 per cent. Meanwhile St George, Bank of Melbourne and BankSA have also upped their rates in the last four months.
Sally Tindall, research director at Rate City, told Starts at 60 that this decision should serve as a “wake-up call” for customers – particularly those with ANZ – who struggle to pay off their credit card in full each month, warning that other providers may also be tempted to follow suit and raise their own purchase rates.
“Now Westpac and ANZ have hiked the majority of their credit card rates, others might be tempted to follow suit,” Tindall said.
“The easiest way to get a credit card interest rate cut is to switch to a lower rate card. There are 13 providers offering credit cards with interest rates under 10 per cent, including cards from CBA and Westpac, so there are significant savings to be made if you’re not complacent.”
ANZ made headlines this week when they hiked the purchase rate on several of their credit cards to 20.24 per cent, with some – including the Rewards Black and Rewards Platinum cards – going up by as much as 1.45 per cent. The bank’s lowest rate card is still their ANZ Low Rate card with a purchase rate of 12.49 per cent.
The increase was debated on Channel Seven’s Sunrise program, with Scott Phillips from Motley Fool telling the breakfast show: “They try and slip it through. We all know we’re focused on mortgage interest rates, that’s the big number we all look at and talk about. So if you can slip through a half a per cent on credit cards, maybe no one will worry about it.
“The big issue is, you know why they can do it? Because we don’t care enough.”
According to Rate City, the cards with the lowest rates are G&C Mutual Bank’s Low Rate Visa (7.49 per cent), Auswide Bank’s Low Rate Visa (8.95 per cent), Community First Credit Union’s McGrath Pink Visa and their Low Rate card (both 8.99 per cent), while MOVE Bank, Northern Inland CU and Easy Street Financial Services also offer cards with rates of 8.99 per cent.
Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.