Does The Cash Rate Cut Affect Your Credit Card Interest Rate?

6 December 2015
What have credit card interest rates done this year, and will it affect your credit rating?

The Reserve Bank of Australia has dropped the official cash rate several times over 2015 to 2016. So have these drops had an impact on credit card rate changes?

Not much, apart from lowering the maximum amount on selected rates. However, there is a big difference between the highest and lowest rates available, so it’s important to compare your options.

Credit card interest rate changes in 2015

We took a look at the credit card interest rates as at the end of January and again as at the start of December 2015. If you’re new to the personal lending scene, these interest rates are known as the Annual Percentage Rate (APR) or ‘listed’ or ‘published’ rates.

Low rate credit cards

Low rate credit cards are generally “no frills” cards – the ones with a low rate but no rewards programs.

When it comes to the interest rate charged on low rate credit cards, the average interest rate charged on a low rate credit card dropped very slightly, from 12.49% to 12.40% p.a..

They started at a minimum of 8.99% and stayed the same between January and December 2015. Meanwhile, the maximum rose slightly from 14.99% to 15.95% p.a..

What about annual fees? The maximum fees for low rate credit cards lowered from $120 to $99 per year, and the average annual fees also fell to just under $45 per year.

Standard rate credit cards

Standard rate credit cards include those that offer rewards programs. To some extent, the interest rate on these cards isn’t as important as they are targeted to consumers that don’t carry an ongoing debt.

When it comes to standard credit cards, average showed a slight fall to 18.89% p.a..

Interest rates started at a minimum of 10.49% and dropped to 7.99% p.a.. The maximum stayed the same at 23.50% p.a..

The maximum annual fees for standard credit cards stayed the same with an average of $115 per year, and a maximum of $700 per year.

What does that mean for me?

It means that you should shop around!

Currently on Canstar’s database:

  • 25% of credit cards have an interest rate of below 12.99% p.a
  • 25% of credit cards have an interest rate between 12.99% and 18.79% p.a
  • 25% of credit cards have an interest rate between 18.79% and 20.24% p.a.
  • 25% of credit cards have an interest rate above 20.24% p.a

“Credit card interest rates don’t tend to change in line with changes in the official cash rate. The most important thing for consumers to be aware of, though, is that there is a more than 14% difference between the highest and lowest credit card ongoing interest rates. If you don’t have an ongoing debt then the interest rate is irrelevant. If you do have a debt though, then ensure that the rate you are paying is low.” – Mitchell Watson, Canstar’s Research Manager.

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