Credit card rates lead higher borrowing costs

The Reserve Bank may have held off any change to official cash rates since November, but lenders and deposit-takers have been busy over the past five months making lots of adjustments to mortgage, credit card and term deposit rates.

The most noticeable trend is in the credit card market, where, according Infochoice, 22 institutions have changed their rates since December. In all but one instance the rates have gone up, with the average increase being 37 basis points.

The big movers include Community CPS, which put up rates on a couple of cards by 175 basis points in April, and Citibank, which increased the rate on its ReadyCredit Visa by 75 basis points in December.

Last month, Macquarie Bank increased the rate on its Visa RateSaver by 50 basis points, from 14.2 to 14.7 per cent, and Commonwealth Bank increased the rate on its corporate and business cards by 45 basis points.

Bank SA and St George increased the rates on their Vertigo MasterCards by 50 basis points in March.

Following this recent round of rate increases, credit card interest rates of 20.74 per cent have become a common price point. GE Money has pushed through the 21 per cent barrier, with a rate of 21.74 per cent on its GO MasterCard.

The average rate on low-rate cards is now around 13.5 per cent - almost double the average standard variable mortgage rate.

Rising rates won't do much for a market that is already stagnating. According to the latest Australian Prudential Regulation Authority data, bank credit card balances increased by just 0.01 per cent in March, which works out as an annualised rate of 0.12 per cent.