For immediate release

Thursday 13 November 2008

Credit card interest rates too high

Bank workers' union Finsec is calling on the banks to explain why the interest rates on credit cards haven't dropped in response to reductions in the Official Cash rate and in the face of mounting evidence that the recession is causing greater reliance on credit cards to cover weekly expenses.

"Despite the drop in the OCR and cuts to mortgage interest rates, credit card interest rates are still very high and haven't come down. The banks have got some explaining to do because on the face of it this just looks like profit gauging," said Finsec Campaigns Director Andrew Campbell.

"Credit card interest rates are over 20% on average. High interest rates create a plastic prison that many customers will take years to escape from," said Campbell.

Evidence is mounting that growing numbers of Kiwis are dependent on their credit cards to make ends meet:

- The Reserve Bank's Financial Stability report showed that the outstanding portion of credit card debt bearing interest grew 12% in annual terms during August (compared to 5% the previous August), the fastest growth in this area since 2002.

- The Consumer Credit Expectations Survey by Dun and Bradstreet found that one in four expect to use their credit card to cover purchases they cannot otherwise afford in the next three months.

- A 10% increase in credit card applications in the year to September according to Veda Advantage.

"It is time for the banks to rethink their interest rate charges and also the sales targets that force bank staff to heavily push credit cards on to customers," said Campbell.

"Bank branches everywhere have sales and referral targets for credit cards that are making our debt addiction even worse. Employment practices need to reflect a greater social responsibility rather than a never-ending quest for bigger profits." said Campbell.

ENDS