According to a new CHOICE survey, around half of Australians who reported using their credit card recently say they do not know the interest rate that would apply. Are consumers just dim, or are banks purposely making their products confusing?
Credit cards picture from Shutterstock
As part of a representative survey into national spending habits, CHOICE asked 1045 Australians if they knew the interest rate that currently applied to new purchases on their credit card. 48% responded that the were unsure or didn't know. The consumer group argues that its survey confirms that credit cards are deliberately confusing products, designed to distract consumers from very high interest rates.
"The gap between the Reserve Bank’s cash rate and the average credit card interest rate has widened by 176 basis points since June 2011, earning the banks an additional $630 million this year alone," CHOICE said in a statement.
The average credit card interest rate in Australia is 17.16 percent, with the nation's credit card debt adding up to over $36 billion.
“Credit cards are marketed as a convenient payment option, often with a modest annual fee, honeymoon interest rate periods and seemingly lucrative rewards programs," CHOICE CEO Alan Kirkland said. “But the real rewards program here is for our banks, who earn an estimated $6.2 billion in revenue from average credit card interest rates."
Kirkland said that anyone who does not pay off their balance in full every month should check their credit card interest rate and shop around for a low-rate, low-fee card. Click here for our recent overview of best credit card and bank deals from the past month.