When it comes to sky high credit card rates, Aussie women have had it up to here.
Given that the cash rate is at a historic low of 1.5 per cent, and has been on a downward spiral for some time now, it raises the question: why haven’t credit card interest rates also fallen over time?
New finder.com.au research reveals that 79 per cent of Australians – 14.3 million people – are dissatisfied with credit card interest rates, saying they feel “cheated” that rates don’t move in accordance with the RBA cash rate.
Generally, product rates for mortgages often follow cash rate movements, but this doesn’t apply to credit cards.
Currently, the average credit card interest rate is more than 10 times the official cash rate, which is raising eyebrows, considering that the cash rate represents the official cost of borrowing.
To manage your credit card bill, consider these tips:
Don’t increase your credit card limit
It may be tempting to increase your limit for a particular purchase, but this will only see you get into further debt.
Where possible, avoid increasing your credit card limit and instead see if there’s another way you can raise the funds for the purchase.
Whether it’s selling your vehicle, renting out a spare bedroom in your property or cutting back on travel expenses, there are many ways you can create surplus cash.
Apply for a balance transfer
When you apply for a balance transfer, you shift your existing debt onto a new card with a lower interest rate.
Often, these cards come with a 0 per cent promotional period, which means that no interest will be charged for a certain period of time.
If you can repay your debt during this period, you won’t pay any interest at all.
Just keep an eye out for that revert rate because once the promotional period is up, it will revert to a much higher interest rate.
Pay more than just the minimum amount
Going above and beyond the minimum repayment will see you clear your debt faster.
A $2,000 debt at 20 per cent interest with a 2 per cent minimum payment will take you more than 40 years to repay and cost you over $5,000 in interest if you only pay the minimum amount.
Add $50 each month and the debt will be repaid in just 3 years with only $500 worth of interest paid.
Give preference to high-interest debt
If you have several credit cards or other types of personal debt, always prioritise paying off the highest interest debt first.
Once you’ve paid that account off, close it to avoid further charges and move onto the next account with the highest interest rate.
Consider taking out a personal loan
Signing up for a personal loan is a good way to consolidate your debt at a lower interest rate.
Personal loans typically come with a more competitive interest rate and a longer loan term.
However, remember to account for establishment fees and any account-keeping fees attached to the personal loan.