How much credit card interest do Aussies pay?

Australians owe quite a lot on credit cards and pay quite a lot of credit card interest. Find out more…

Notwithstanding Australia’s low (low, low) interest rate environment and our improved personal saving profile, our analysis of official statistics reveal that Australians are paying more than $15 million per day, on average, in credit card interest, based on the average credit card interest rate.

The total amount owed on credit cards each month is around $50 billion, and we are paying interest on more than $32 billion of that. The current average credit card interest rate on CANSTAR’s database is 16.58 percent.

Canstar-star-rating-and-awards-Comparing-costs Credit card debt we’re paying interest on $32.2 billion
Canstar-star-rating-and-awards--Average-interests-on-credit-cards Average credit card interest rate on CANSTAR’s database 16.58%
Canstar-star-rating-and-awards-Credit-card-costs Average amount of credit card interest being paid per year $5.3 billion

Current credit card interest rates

With $51.3 billion currently owed on credit cards – and $32.2 billion of that accruing interest, the credit card interest rates we’re paying are very important.

Currently on CANSTAR’s database, the interest rates for personal low rate credit cards and personal standard rate credit cards are as follows:

Low rate credit cards
Min Max Average
Purchase 8.99% 13.99% 11.93%
Cash Advance 8.99% 21.99% 16.89%
Balance Transfer 0.00% 11.49% 1.79%
Fee $           –  $       99.00  $    44.61
Standard credit cards
Min Max Average
Purchase 8.99% 23.50% 19.28%
Cash Advance 8.99% 29.49% 20.42%
Balance Transfer 0.00% 7.89% 0.78%
Fee $           –  $    700.00  $  124.94

Source: Canstar. Based on credit cards listed on Canstar database 5/10/16

 

How have credit card interest rates changed?

Despite Australian spenders wishing otherwise, the fact is that credit card interest rates are higher than ever, which is not great news for those of us who contribute to the $32 billion of credit card debt that’s currently accruing interest.

Average credit card interest rates have, in fact, increased since the pre-GFC days, while the official cash rate is at a record low. Consider this:

  • In November 2007 the official cash rate was 6.50% and the average credit card interest rate was 14.51%.
  • In October 2016 the official cash rate was 1.50% and the average credit card interest rate was 16.58%.

In other word, the margin between the official cash rate and the average credit card interest rate has increased over the past ten years from 8.01% to a whopping 15.08%. Ouch!

So how much credit card interest are we potentially paying each year collectively? Well, based on the $32.2 billion that we pay interest on and the minimum, maximum and average credit card interest rates on CANSTAR’s database…

  • $32.2 billion at the average rate of credit card interest would be $5.3 billion in interest charges per year, or around $14.5 million per day.
  • $32.2 billion at the maximum rate of credit card interest rate of 23.50% would be $7.6 billion in interest charges per year, or around $20.8 million per day.
  • $32.2 billion at the minimum rate of credit card interest at 8.99% would be $2.9 billion in interest charges per year, or “just” $7.9 million per day. What a bargain!

Credit card debt over the years

Choosing the right credit cardAs mentioned before, Australians have total of over $50 billion in credit card debt, $32.2 billion of which accrues interest. The following table shows how both the total credit card debt and the debt we pay interest on have changed over the last 10 years. Total credit card debt has increased by more than $10 billion in this time, while the amount we pay interest on has remained relatively constant by comparison, rising to a high of $37.1 billion in 2012.

Year (April) Total credit card debt Credit debt we pay interest on
2007 $39.6 billion $28.9 billion
2008 $43.1 billion $31.2 billion
2009 $44 billion $32.3 billion
2010 $47.1 billion $34.5 billion
2011 $49.2 billion $36.2 billion
2012 $49.9 billion $37.1 billion
2013 $49.3 billion $36.1 billion
2014 $49.9 billion $33.8 billion
2015 $51.07 billion $32.8 billion
2016 (July) $51.7 billion $32.2 billion

Source: rba.gov.au/statistics

 

How have the interest rates changed over the years?

Credit card debt is a fact of life for many Australian households and with an official cash rate of just 1.75%, it may be surprising for some to realize that the average interest rate being paid on a standard credit card is more than 17%.

While the official cash rate has fallen post-GFC, the average credit card interest rate has been predominantly on the rise. In total, the gap between the average standard credit card interest rate on CANSTAR’s database and the official cash rate has widened significantly since 2007.

Date Average standard credit card interest rate Official Cash rate
Nov-07 14.51% 6.50%
Nov-08 15.79% 6.00%
Nov-09 15.31% 3.25%
Nov-10 16.44% 4.50%
Nov-11 16.88% 4.75%
Nov-12 17.01% 3.25%
Oct-13 17.02% 2.50%
Oct 14 17.00% 2.50%
Oct 15 17.00% 2.00%
Oct 16 16.58% 1.50%

Source: CANSTAR and RBA. Credit card interest rates based on  products on CANSTAR database.

Which credit cards offer outstanding value?

Choosing a credit card that’s right for you depends on what type of spender you are and what type of card you’re looking for. Do you spend a lot but always pay off the balance? Do you constantly juggle an ongoing credit card debt? Do you fall somewhere in between? Irrespective, there is no shortage of credit cards vying for your business

To help you compare the products available, CANSTAR has rated 169 credit cards across 60 providers in 2016, assessing the value for each category of card. We have found:

  • 15 low interest rate credit cards that offer outstanding value
  • 14 low fee credit cards that offer outstanding value
  • 6 premium  credit cards that offer outstanding value on a $24,000 pa spend
  • 6 premium  credit cards that offer outstanding value on a $60,000 pa spend
  • 9 premium  credit cards that offer outstanding value on a $120,000 pa spend
  • 6 rewards credit cards that offer outstanding value on a $12,000 pa spend
  • 4 rewards  credit cards that offer outstanding value on a $24,000 pa spend
  • 6 rewards  credit cards that offer outstanding value on a $60,000 pa spend
  • 6 rewards  credit cards that offer outstanding value on a $120,000 pa spend
  • 5 frequent flyer credit cards that offer outstanding value on a $12,000 pa spend
  • 6 frequent flyer credit cards that offer outstanding value on a $24,000 pa spend
  • 7 frequent flyer credit cards that offer outstanding value on a $60,000 pa spend
  • 7 frequent flyer credit cards that offer outstanding value on a $120,000 pa spend

 

CANSTAR’s Credit Card Star Ratings is an invaluable starting point when creating a shopping list of credit cards that match your spending profile. View the complete Credit Card Star Ratings report.

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