Credit card rates: Slow to fall, quick to rise
Major banks have been quick to pass on the first interest rate rise in full to their credit card holders – in contrast to their reaction to rate falls last year.
The four major banks passed on the May official rate cut of 0.25 percentage points promptly and in full last month.
However, InfoChoice historical data shows the banks were slow to move on cutting card rates when official rates were falling last year and did not pass cuts on in full.
Over the course of 2001, ANZ, NAB, CBA and Westpac cut the interest rates on their main credit card offerings by between 0.75 and 1.5 percentage points despite official rate cuts of 2 percentage points.
If the banks continue to pass on expected rate rises in full to cardholders over the course of 2002, the result will be that their interest rate margins on credit cards will increase, raising card profitability for the banks.
If official interest rates rise again this week, can we expect the full flow on again to credit card rates?
The scrutiny to which home loan rate adjustments are subjected have meant the banks face enormous pressure to pass on both falls and rises in full within ten days or so of official rate moves. With credit cards not under the same spotlight, there does not appear to be the onus for banks to meet consumer expectations on these products.
|Interest Rate at Feb 01||Interest Rate at April 02||Change (Feb 01 to April 02)||Interest Rate at May 02||Change (April 02 to May 02)|
|Reserve Bank Official Cash Rate||6.25||4.25||-2.00||4.50||0.25|
|Cards with Interest Free Days|
|ANZ Bank||ANZ Free Days Mastercard||16.75||15.75||-1.00||16.00||0.25|
|Commonwealth Bank||True Rewards Credit Card||16.65||15.65||-1.00||15.90||0.25|
|National Australia Bank||44 Days Interest Free Visa||16.75||15.25||-1.50||15.50||0.25|
|Westpac||55 Day Visa Card||16.15||15.40||-0.75||15.65||0.25|
|Cards with No Interest Free Days|
|ANZ Bank||ANZ Low Interest Mastercard||13.75||12.75||-1.00||13.00||0.25|
|Commonwealth Bank||No Interest Free Period Visa Card||14.75||14.00||-0.75||14.25||0.25|
|National Australia Bank||Fee Free BankCard||15.85||14.35||-1.50||14.60||0.25|
|Westpac||No Annual Fee||15.20||13.95||-1.25||14.20||0.25|