Australia: Banks are targeting customers with new low interest rate credit cards

Following Westpac’s new Lite card, which only has an interest rate of 9.9 percent on purchases, and CBA also announcing a new low-rate card it is apparent that many Australian lenders are looking to introduce rates under 10 percent into the market, much lower than the current highest rate of 24.99 percent.

Low rates are not just something the Big 4 are introducing. The financial comparison website, RateCity, reports that smaller lenders, such as Bank Australia and Teachers Mutual Bank, are also offering similar low-interest rate deals. ING is now offering an instalment plan to pay off larger purchases at 9.99 percent.

"Whether or not the low-interest rates still drive customers to switch their card depends on their personal situation...
RFi Group data shows that amongst non-rewards cardholders likely to switch their card, 16% plan to switch to receive a lower interest rate."

Whether or not the low-interest rates still drive customers to switch their card depends on their personal situation. Sally Tindall, from RateCity, explained, “Interest rates are essential for people who have revolving credit card debt. However, people tend to be less likely to switch credit cards because it’s tied to their home loan, and end up using the card that is given to them by their bank.”

Reducing interest rates is very helpful for reducing household debt but, Tribeca Financial CEO, Ryan Watson warns that credit card debt can result in a cycle of debt lasting a lifetime. The top priority for credit card debtholders is to minimise their payable interest by switching to a no or low-interest credit card.

"Interest rates are essential for people who have revolving credit card debit. However, people tend to be less likely to switch credit cards because it's tied to their home loan, and end up using the card that is given to them by their bank.
Sally Tindall, Money Editor, Ratecity"

RFi Group data shows that amongst non-rewards cardholders likely to switch their card, the main drivers of switching are interest rates and annual fees; 16% plan to switch to receive a lower interest rate.

 

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