Credit card rates four times OCR : RateCity

The average credit card interest rate is four times more than the Reserve Bank cash rate, with providers estimated to be earning $6 billion a year in interest.

According to research conducted by RateCity, the average purchase rate across 200 personal credit cards is 17.16 per cent, while the current RBA official cash rate is 4.25 per cent.

In total, 90 per cent of cards have kept their purchase rates at the same level as October 2011, while nine of the 200 cards dropped their purchase rate since this time. However, only four passed on the 50 basis points resulting from two consecutive rate cuts, while nine increased purchase rates by up to 100 basis points.

Commenting, RateCity’s chief executive officer, Damian Smith, said: “Credit cards will have much higher interest rates than the Reserve Bank’s case rate because they are unsecured loans and therefore have more risk of default.

“But we can’t see any reason why they are charging higher margins above the cash rate compared to the peak of the global financial crisis,” he said.

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