3 September 2015
Most credit card users have no clue if they’re paying too much for their credit card and don’t seem to care, according to a new survey by industry super fund−owned bank ME.
The results confirm the current credit card inquiry has come at a great time.
Of 2,200 credit card users surveyed by ME, a staggering 73% didn’t even know their interest rate and 40% didn’t know if their card had an annual fee.
Yet 65% said they’re confident they have the best card to suit their needs and 78% have never switched cards – a surprising level of faith given how little they know about their card.
The research also highlighted the importance of understanding interest rates: 36 per cent of respondents reported they were ‘credit card revolvers’, which means they’re paying interest on their purchases.
Many respondents were also shown to be revolving on high balance amounts: 72% said they made $500+ purchases on their card, and of those, 35% said they were revolving, meaning they’re paying interest on higher amounts.
Finally, 24% said they’d made cash advances using their credit card in the past 12 months, highlighting the importance of understanding the cash advance interest rate, which is often much higher than the purchase rate.
ME’s Head of Deposits and Transactional Banking, Nic Emery, said the findings were a wake-up call for credit card users to check interest rates and fees.
“The best thing about the current Senate Economic References Inquiry into credit card interest rates is its ability to shine a light on the high rates people could be paying, as well as making people aware that low-cost cards are available.
“You don’t have to accept high-cost cards given one in four cards have rates under 13%.
“But with more than 50% of cards charging 19% or more, many credit card users are probably paying too much.
“The credit card inquiry couldn’t have come at a better time and should prompt people to compare and switch if they’re paying too much.
“Credit card providers wouldn’t be able to charge so much if people were more vigilant and exercised their right to switch.
“Consumers should also be wary of cards with extra features, which usually attract higher rates and annual fees. The average interest rate across ‘rewards cards’ is 19.5% while the average across ‘non-rewards cards’ is 14.1%. “It’s also important to be aware of introductory offers that start off low, but spike after the ‘honeymoon period’ is over. A lot of people think they can pay balances within the time frame, but in reality many don’t.”
• Of those respondents sticking with their credit card despite not being confident it met their needs, 40% continue ‘out of habit’, 35% said it helps them ‘keep track of banking activities more easily’, and 22% claimed ‘switching was just too hard’.
• 14% of respondents have taken out a credit card balance transfer offer and of those, 70% end up spending on the card.
• South Australians and Victorians were less clued-up on their interest rate than other states (78% and 75% respectively).
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Note about the survey: Survey was conducted in July 2015 via global business intelligence and media provider, RFi Group, using an online survey method. Survey completed by >2,000 Australian adults.