Lenders not cutting credit card rates 'due to risk concerns'

Although numerous mortgage products have been cut in line with the base rate reductions by the Reserve Bank of Australia (RBA), lenders remain reluctant to do the same with credit cards, it has been suggested.

Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, tells the Australian that since the RBA began its series of rate cuts banks have been slow to match this with interest reduction on personal credit products due to a focus - both on the part of lenders and consumers - on mortgage rates.

He claims that banks may have been holding back from reducing rates on products due to "fears that credit card defaults might rise as we go through a tougher economic environment, so they are trying to cover the risk of that".

Continuing he suggests that two further RBA cuts could take place this year - one in August and one in October.

Mr Oliver's comments come as research by consumer group Choice showed that more than half of the cards issued by banks, building societies and credit unions charge higher rates now than they did two years ago.

As such, seeking a product that offers an interest free period on purchases could be advisable.

Written by Bret Clement