In the aftermath of Christmas spending, credit card holders should brace themselves for sneaky interest rate hikes, gracing the pages of statements due out this month.
The silly season could leave many credit card holders stung after it was revealed by RateCity that 23 institutions upped their rates on 113 cards by an average of 25 basis points in December 2010.
With a new average purchase rate on personal cards reaching 17.42 percent across the board, Citibank and Bank of Queensland were two of the culprits among banks, while non-bank lenders including GE Money, IMB and American Express were also guilty of the rise.
Why you should watch your rates!
Major bank cardholder, Karina, decided to compare lenders through RateCity after her bank increased her rate by 5 percentage points over the Christmas period without notifying her.
“Apparently I was on a honeymoon rate, which I didn’t know because it was tied up with my home loan package, and they forgot to switch it off,” she says. “Once they realised, they switched me to their standard rate without notifying me … and I got charged a phenomenal amount of interest.
“I switched to a Jetstar MasterCard that offered a six-month interest-free period on the transferred balance, and 12.49 percent on new purchases. Plus a $50 Jetstar voucher when I signed up, and $100 when I made my first purchase – a deal too good to refuse!”
Despite the rise in interest rates, there is no better time to compare lenders for credit card offers on the market. Many institutions sport competitive deals on balance transfers, tempting customers with zero interest for the first six months. This can translate into massive savings, for example, if you transfer a debt of $4000 from 15 percent to a zero balance, you could save potentially about $310 in interest repayments.
If you need more time to pay off your heaving festive debt, 12-month introductory offers with rates between 3 and 7 percent could be for you. In fact, a quick comparison search on RateCity reveals Bankwest offers their Lite MasterCard with 5.99 percent on balance transfers and purchases for the first 12 months, which then reverts to 10.75 percent thereafter, so it’s all about shopping around.
Or getting more from your credit card could be as easy as talking with your provider. Madeline O’Connor, head of credit cards at Citibank Australia says, “We have lots of different types of credit cards and offers. In fact, we’re giving reward card customers a free bottle of premium wine each time they dine at a participating restaurant.”
If you’ve blown your budget over the holiday season, remember there are no exit fees to switch most credit cards or application fees to sign up, so take the time to compare lenders online today.