Credit Cards Compete For Business
Sydney Morning Herald
Friday August 29, 1997
While home loan rates have fallen, banks have been slow to pass on interest rate cuts to credit card holders.
However, so far this month, two of the major banks announced credit card rate cuts, and indications are that more will come.
Andrew Willink, managing director of research company, Cannex, says the growth in the number of people consolidating their borrowings into their home loans has improved the competitiveness in the credit card market.
As credit cards offer unsecured credit, Willink says banks have to cover credit card defaulters in their margins.
"Some credit unions may have a better experience in credit card repayments. They are closer to their consumers and their rates tend to be more attractive," he says.
Willink says consumers are now rolling other debts into their home mortgages to take advantage of the lower rates.
"The environment is now set for a more competitive credit card and personal loan market.
"There is more competition coming from non-bank providers," says Willink.
Just a few days ago, Telstra, aiming to beat the banks at their own game, announced it will be the first in the market to have a large-scale rollout of smartcards.
The average interest rates offered on "interest free days" credit cards by the major four banks has fallen just 1.08 per cent to 15.05 per cent since July last year, according to Cannex.
This compares with the 2.5 per cent cut in official interest rates from 7.5 per cent to 5 per cent and a larger cut of 3.03 per cent, from 9.76 per cent to 6.73 per cent, in average home mortgage rates.
Broadly, there are two types of credit cards on offer. One charges a slightly higher rate (around 15 per cent) and offers an interest free period. The other has no interest free period and charges a lower rate (near 12.5 per cent).
© 1997 Sydney Morning Herald
