Consumers should beware of credit card introductory offers that banks are using to lure them in. These credit card intro offers can make annual costs jump as much as $676 once the introductory period is over. Don’t be deceived into thinking that obtaining a low-interest card from a big bank is your only option – or the best one.
Mozo, a finance comparison website, investigated 80 different credit cards along with their initial fee discounts and promotional periods. This investigation was done leading up to a Senate Inquiry into credit card interest rates. Surprisingly, it was discovered that the highest ongoing annual cost, after the interest-free period was over, was a staggering $1,376 for a Platinum card. The lowest was $326. These amounts are based on an average spend of $3,261.
Mozo Director Kirsty Lamont explained that “Unfortunately, honeymoon offers are often marketed on the most expensive credit cards, while low-rate credit cards rarely have these sweeteners attached”.
Ms Lamont when on to say that this kind of marketing creates a huge problem for cardholders who are tempted to spend big without learning the discipline to pay off their purchases each month. Once the honeymoon period is over, the cardholder is left with huge debts to pay off and revert rates of up to 20.74%.
Choice campaign manager, Erin Turner, says that “Interest rates on ANZ, Commonwealth Bank, NAB and Westpac low rate credit cards have moved by less than one per cent over five years, with most increasing rates from 2013”.
Choice, a consumer advocacy group, also revealed that these four big banks are conning consumers. These low-rate “deals” on cards simply revert to high-interest ongoing rates. According to Turner, the only one of the four big banks that did not hike the interest rate on its low-rate card over the past five years is Westpac. However, despite the historic drop in the cash rate, Westpac still kept its rate static at 13.49%.
In light of all of this, Turner advises that consumers should look elsewhere like credit unions and small lenders. The best, current available rate, 8.99%, is offered by Community First Credit Union. She went on to advise that consumers should not trust big banks when it comes to credit card marketing.
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