Sky-high credit card rates attract scrutiny

The level of credit card interest rates charged by banks and others in Australia may become the subject of an informal review, financial regulators flagged at a Senate committee yesterday.

Treasury Secretary John Fraser told the Senate's estimates committee that his department conducted an internal review of the record spread "some months ago" and found the gap to be widening.

Fraser highlighted "the fact that it does seem that people who pay these credit card interest rates, those who don't fully pay off their amounts, tend to be people perhaps less capable of servicing that debt - and that worries me.

"So, I think it is something well worth considering and we'll give some further thought to it.

"My personal view is that it is an issue well worth further, deep investigation and consideration," Fraser said.

Some platinum and high rewards cards charge rates of in excess of 20 per cent interest, though rates of less than half this level are available from smaller lenders and credit unions, the consumer lobby Choice said yesterday.

Malcolm Edey, assistant governor of the Reserve Bank of Australia said; "You have asked a good question why the margin on these interest rates is as high as it is ... We don't really have a good answer to that, and to me the margin does look big. If people are interested in knowing why that is, we are happy to have a look at it and find out more about that."

Edey said the Council of Financial Regulators may be the appropriate body to conduct any investigation.