As any credit card user in Australia knows only too well, interest rates on credit cards did not go down much as the Reserve Bank of Australia last year began slashing the official overnight rates to emergency historic lows.

Unlike mortgage rates, which fell in tandem with the RBA’s cuts, credit card rates stayed stubbornly high. According to Datamonitor, a market analyst company headquartered in Sydney, this is because credit card rates don’t face the spotlight politicians and consumer groups hold on mortgage rates—and because the four major Australian banks have a stranglehold on the credit card market and like their high profit margins.

But Datamonitor’s latest research shows that might be set to change.

Circumstances seem ripe for new players to enter the lucrative credit card market, including smaller and regional banks, and non-bank lenders. A rising wave of new competitors, all looking for a slice of that pie, could enter the credit card market with aggressively low rates and put downward pressure on the Big Four to lower their own rates and fees to retain their current customer base.

Petter Ingemarsson, senior financial service analyst at Datamonitor, expects the new credit card providers to begin arriving as the economy continues its push towards recovery and growth. He says the growing consumer awareness of high credit card fees and rates will drive the new competition, citing research that showed 64% of Australian credit card holders consider lower rates and fees as most important when selecting a new card, rather than the 7% who consider great new rewards schemes as the biggest draw.

Credit card loans written off as uncollectible have not grown at the rate some analysts expected, and Australian financial institutions have not suffered the tremendous losses experienced by some in the U.S., U.K., and Eurozone. In addition, credit card repayments have increased and the average outstanding balance has decreased, with a number of cardholders using government stimulus payments to lower their level of debt.

Source: news.com.au