Financial services researcher Canstar Cannex has just released its latest credit card star ratings report and it says the days of 10 per cent low-rate cards are gone.
"Cards charging under 10% interest have become a casualty of the tight financial times, as financial
institutions hike up the rates on cards at the lower end of the market," it says. "Twelve is the new ten, it seems," with more credit cards gravitating towards 12% or even 14%.
And that's on cards where you forgo interest-free days in return fora low rate.
Fully featured cards -- the ones that come with rewards points and 45 to 55 days interest free -- are charging around 21 per cent on the debt you leave to pay off next time round.
“Many people with a mortgage are paying about 2% less now than they were a couple of years ago, yet credit card rates have gone up, not down,” Canstar Cannex financial analyst Peter Arnold says.
That's because banks are paying more for the funds they loan out as credit, and they see "unsecured" credit card debt as risky. (They can't get their money back by going for your house or car if you go bad on them.)
Interestingly, Canstar Cannex's best low-rate cards are all from credit unions: Sydney Credit Union, mecu and Credit Union SA, all on 10.49%.
The bottom line is that the interest rate doesn't matter if you pay off your card at the end of each month. Use your card for convenience, not to buy things you can't actually afford.
And don't be put off by the annual fee on low-rate cards. Paying a high rate of interest on a card without the annual fee is a false economy -- you'll easily find yourself worse off.
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