The ANZ bank plans to cut interest rates on two credit cards by up to 2% from this week, creating the lowest rate on an Australian card among the big four banks.
From Thursday, February 23, interest on ANZ’s Low Rate Platinum card will fall by 2% to 11.49%pa, while the bank is also shaving 1% off its Low Rate Classic card, which drops to 12.49%.
The Low Rate Platinum card has an annual fee of $99, while the Low Rate Classic card costs $58 annually, the lowest annual fee of a major bank. Both cards offer up to 55 days interest free.
The lowest rival cards are Newcastle Permanent’s Value+ at 11.49% and $49 annual fee and Members Equity’s Frank card at 11.99%, with no annual fee.
ANZ says it has more than 500,000 Low Rate accounts and believes the rate cut will save customers around $150 a year. An estimated 80% of people with those cards pay interest.
The ABS has found that while people on higher incomes pay more in interest repayments annually, as a percentage of total income, that percentage falls the more you earn.
The bank says it’s the lowest rate they’ve had on credit cards in 14 years.
ANZ executive Fred Ohlsson said the customers with low rate accounts are “typically middle income Australians who predominantly use their credit card for everyday household purchases, such as groceries”.
“These changes mean they will have the best rate available from any of the major banks or any of the regional banks owned by the majors,” he said.
The bank’s decision to reduce the rates will put pressure on its competitors to make a similar gesture before they face the federal parliamentary committee on economics for a second time next month. The cuts will give CEO Shayne Elliott bragging rights after he was grilled on the issue by the committee last year and told senators the bank wanted take the lead on lower rates.
Most credit card interest rates sit closer to the 20% level and have not shifted despite cuts to the official cash rate, which now sits at 1.5%. Banks make around $6 billion annually from credit card fees and interest payments.
Last year, in response to the senate economics committee’s 2015 report on credit card interest rates, treasurer Scott Morrison said the government supported a majority of the report’s 10 recommendations, which included more more prominent disclosures about the cost of credit, including a card’s interest rate and annual fees in any advertising and marketing material.
The government agreed with the committee that “a relative lack of competition” was in part to blame for higher credit card interest rates.
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