Minimal Interest Rate Cuts Drive People to Pay Off Credit Cards Faster

In the wake of banks choosing to only pass on a fraction of the interest rate cuts made by the Reserve Bank, credit card customers are rushing to pay off their credit card debts. People with car loans and personal loans are behaving in a similar way too

Figures recently released by the Reserve Bank show that in the 2013 year to March, the average credit card debt was $3256.70. This marks an average reduction of 2.4%

The average credit card balance accruing interest reduced even more significantly to $2294.30, a decrease of 5.7%. This marks the biggest annual fall since 2002 – when figures first began to be monitored, said CommSec economists

Since late 2011, banks have passed on reductions in credit card interest rates of only 0.12 percentage points. By way of comparison, the Reserve Bank has reduced official interest rates by two percentage points

Official interest rate cuts have not been passed on by banks to customers with personal loans. In fact, Canstar figures showed that personal loan interest rates have decreased by only 0.78 percentage points since October 2011 to 14.68%. This is less than half of the official interest rate reduction for the period

Source:

http://www.watoday.com.au/business/credit-cards-debts-being-paid-off-faster-20130513-2jibb.html

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