Banks and credit card companies are pocketing hundreds of millions of dollars in extra interest payments by refusing to pass on Reserve Bank rate cuts to credit cards.
Interest rates on more than two-thirds of credit cards have remained unchanged since last year's Melbourne Cup, despite the Reserve Bank lowering the cash rate by 1.25 percentage points in that time, an analysis by InfoChoice has found.
The refusal to cut rates has cost the average Australian about $50.
Of the 190 credit cards InfoChoice has monitored since November, just 63 have changed their rate and, 14 of these have increased their interest charges by an average of 0.36 percentage points. The average rate cut by the 49 cards that had lowered rates in the past year was just 0.46 percentage points.
In the three main credit card categories - a low-rate credit card, a standard credit card, and a premium card from each of the four major banks - interest rates were on average cut by 0.25 percentage points.
InfoChoice general manager Alastair Schirmer said consumers should compare their credit card interest rates and choose a card that suits their circumstances, including how quickly they can pay off debt.
Consumers often started with an understanding of the interest on their credit card but - unlike mortgages - forget to monitor changes in the rate. He urged people to check all cards and accounts annually.
In the past year, InfoChoice figures had shown the big four banks had decreased the interest charged for most of their personal loan products. When people considered their largest debt - which was usually their home loans - Mr Schirmer said they should be thinking more holistically about their personal finances.
''There are about 15 million credit card accounts in Australia, with about $49 billion in credit outstanding,'' he said. If the interest rate on that debt was cut from an average 17.5 per cent to 16.25 per cent in line with Reserve Bank cuts, card holders would be handing over about $1 a week less in interest payments. This would be about $50 in the past year for the average card holder.
But, he said, it meant banks had pocketed an extra $750 million in interest payments from the 15 million credit card accounts.
The head of the Australian Bankers' Association, Steven Munchenberg, said credit card interest rate levels were an individual decision for each bank and card provider.
''InfoChoice is making an assumption that credit interest rate movements must match RBA official cash rate and/or home loan interest rate movements,'' he said.
''Credit card interest rates are generally higher than for mortgages because it is unsecured lending and the risk of default is higher and the rate of recovery of debt is lower.''