Why you should cancel your credit card


Australia's official cash rate has been slashed again and again in recent months, but the same can't be said for credit cards.

And it's a move that has cost Australians a fortune.

In fact, a new analysis has revealed the failure of our major banks to pass on interest rate cuts has cost us billions over the past decade.

Alan Kirkland, CEO of consumer advocacy organisation CHOICE, said the Reserve Bank of Australia had slashed the cash rate from 4.75 per cent in 2011 to the current historic low of just 0.25 per cent - but credit card rates had remained "stubbornly high".

"By failing to pass rate cuts on for credit cards, banks have effectively stolen $6.3 billion dollars from the pockets of Australians," he said.

"Some banks - including ANZ, Bendigo and St George - have even increased rates on credit cards.

"This is disappointing behaviour from an industry looking to restore trust after the scandals of the banking royal commission."

Australians are urged to vote with their feet.
Australians are urged to vote with their feet.

Mr Kirkland said if credit card rates had been cut in line with the cash rate, it would have saved many Australians from "falling into a debt spiral and facing years of unnecessary hardship".

"Banks have cut interest rates on mortgages as the cash rate has fallen. There's no justification for failing to do the same for other credit products, especially now so many Australians have lost their job," he said.

According to the research, the 12 cards with the biggest increase in interest rates since 2016 include Coles' Low Rate MasterCard, ME's Frank credit card, Police Credit Union's Extralite credit card, ANZ's Rewards, Rewards Black and Rewards Platinum, Australian Military Bank's Low Rate Visa credit card, Bendigo Bank's Platinum, Bank of Melbourne's Vertigo, BankSA's Vertigo, Citi's Prestige and St George's Vertigo.


However, an ANZ spokesman told news.com.au the cards "selectively highlighted by CHOICE" were rewards cards that "include features such as rewards points and travel insurance".

"For those looking for a lower rate, ANZ reduced the rate on its low rate card by 1 per cent during the same period to 12.49 per cent - the lowest among major banks' comparable cards," the spokesman said.

"More than a third of our customers don't pay interest on their credit cards on a regular basis.

"We encourage customers to talk to us about which credit card might be best for them as the ones with more features such as rewards points and travel insurance will have different rates and fees and are not suited to all customers."

A Bendigo Bank spokesman also fired back at the analysis, claiming it "compares two different products".

"Since launching, our Mastercard Platinum Rewards product has not had its rate increased," the spokesman said.

"Credit cards are unsecured lending products and feature higher operating costs and higher risk than fixed term, secured lending products such as mortgages. As funding costs represent a smaller portion of our cost base, there is less direct correlation with the RBA cash rate.

"We offer several low interest rate credit cards for customers who have the ability to easily switch products to suit their individual needs at any time. Our cards are highly competitive and represent clear benefits for customers whose interests we seek to balance fairly and transparently in combination with the prudential requirements of operating a bank."

The spokesman said more than half of customers "pay their entire credit card balance in full each month - and pay no interest" while more than 60 per cent of customers currently hold low interest rate products "in the event they do wish to borrow and not repay in full".

"In recent years, the bank has proactively moved more than half of its credit card accounts to a lower purchase rate product as a part of our new product suite designed to better suit our customer base," the spokesman said.

"Bendigo Bank also has several initiatives in place to ensure responsible provision of credit such as requiring new customers to select their preferred credit limit, rather than automatically receive the maximum limit.

"Bendigo Bank has historically not engaged in broader credit card industry practices which are now banned by legislation, such as proactively offering credit limit increases and retrospectively charging interest on balances which have received an interest-free period.

"Bendigo Bank was also the first Australian financial institution to offer customers a debit card as an alternative to the use of a credit card."

And a Coles spokesperson also dismissed CHOICE's claims.

"The 9.99 per cent rate used as a comparison by CHOICE was a promotional offer for new customers that ran for a period in 2016," the spokesperson said.

"The interest rate both before and after this period was 12.99 per cent, which is where it remains today, and we believe it is competitive when compared to similar cards available in the market."


CHOICE will today launch a crowd-funding campaign to raise cash for its Make Banking Fair campaign which will call on banks to do better.

Mr Kirkland urged Australians to take actions, warning that some banks had raised their credit card rates even as their costs had reduced.

"If you're unimpressed with the interest rate your bank is charging, you should vote with your feet. Cancel your current credit card and switch to a bank with a lower-rate card," he said.

"This will send the loudest message to the banks that they need to treat their customers fairly."

Meanwhile, comparison site Finder has found the gap between the cash rate and credit card interest rate was now the widest ever, with the standard credit card interest rate nearly 80 times the cash rate.

If banks had passed on cuts to customers, the average card rate would be 12.90 per cent instead of 19.94 per cent.

Graham Cooke, insights manager at Finder, said as the gap between credit card rates and the cash rate grows even wider, credit card customers should shop around for a more competitive deal.

"The average credit card rate followed the cash rate from 1990 to 2010. Every time the cash rate went up or down, so did the credit card rate," he said. "But that all went out the door from 2010 onwards."

He said today's credit card interest rates range from 11.99 per cent to 21.49 per cent - but that some Aussies just didn't care.

"The reality is that at the high end of the credit card market, customers don't care about the interest rate. They are in it for the points, and that's what this data proves," Mr Cooke said.