The banking sector has been in the spotlight over interest rates on credit cards. And it does in fact seem that there’s a bit of an issue here. However, it’s hard to see what can be done about it. After all, there are plenty of institutions other than the major banks that issue credit cards, so the landscape would seem to be reasonably competitive. Presumably it would only take one of the “little guys” to break ranks and offer a better interest rate deal, and you’d think they’d grab a big share of the market.
A case in point: we recently received an unsolicited offer from one of the major banks to apply for a new credit card.
The interest rate would have been 18.79% and the annual fee $89 – but the “pull” factors appeared to be that the annual fee would have been “waived” for the first year, and there were whole lot of “reward points” for signing up (subject to spending $3000 on the card within the first 3 months – this proviso disclosed only in the very fine print). And, actually, the annual fee was broken down into a fee of $34 for the card and $55 for the “rewards program”.
It seems that these things are more important to at least some consumers than the interest rates that they pay.