SmartWayToPay Calls on Government to Cap Credit Card Interest at 10%
SmartWayToPay is calling on the federal government to cap credit card interest rates at 10% after ASIC recently confirmed that 1.9 million Australians were in persistent credit card debt.
This comes at a time when it appears total personal credit card debt accruing interest in Australia appears to be locked at a consistent $20 billion, as it has remained for 11 months now.
Credit cards charging in excess of 20% interest are common in Australia and current federal law caps the total amount of fees and charges on loans such as credit cards at a whopping 48%.
Cutting the amount of interest a credit card can charge is significant when you consider the differences between a 10% and 20% interest rate on a credit card with $5,000 in debt;
- A 20% interest rate would cost a total of $24,345 making minimum repayments
- A 10% interest rate would cost a total of $8,116 making minimum repayments
- The 20% interest rate would take 28 years and 10 months longer to pay down
SmartWayToPay believes that a credit card cap of 10% is very reasonable and still allows banks to profit, especially considering the average available savings interest rate is a measly 0.4%.
SmartWayToPay spokesman David Liston is today calling on the government to force the bank’s hand on the matter by revising the maximum credit card cap. He has commented on the matter;
“Banks have normalised high interest credit cards to the point at which consumers will accept interest charges 50 times the size of the average interest they earn on savings.
“If banks want credit cards to remain a ‘normal’ product, then they need to bring the interest they charge on them to a level in line with interest rates charged on other unsecured loans.
‘Having said that, there are alternative products like Buy-Now-Pay-Later providers Afterpay and Zip. Consumers who don’t want to pay any interest, do have a choice not to, if they vote with their feet.
“We know it’s very unlikely banks will do this willingly, so we’re calling on the federal government to revise down the interest rate cap to 10%. This is especially important as Australia sails closer to another COVID lead recession.”
SmartWayToPay is a new website created to help Australians save money when paying for things. It receives fees from some low-rate and zero-rate Buy Now Pay Later schemes.