Westpac, NAB, ANZ, St. George, and the Commonwealth Bank are passing along the Reserve Bank of Australia’s 25 basis point rate hike to their credit card customers, but no more.

This meekness by the major banks follows December’s blowout, when they raised rates by a higher amount than the RBA’s measured move, earning ire from their customers, the government, and RBA Governor Glenn Stevens. Westpac in particular was lambasted for its nearly-double 45 basis point hike.

The banks are also being criticised for not fully passing on the RBA’s rate cuts to their clients during the easing cycle, while passing on rate rises almost immediately. In January 2010, for example, the average no-frills credit card carried an interest rate of 12.75%, 9 percentage points above the RBA overnight cash rate.

A spokesman for Westpac, David Lording, pointed out that credit card lending, being unsecured, is much more risky for the banks than home mortgages, and the rates are much more dependent upon international rather than national conditions. With overseas markets improved but not yet back to normal, the banks still face increasing costs of funding themselves.

However, according to Shaun Cornelius, head of consumer group InfoChoice, the continued high spread between the RBA rates and those charged to credit card holders by the banks, is costing consumers roughly $1.2 billion annually. That calculates down to an extra $110 each year for a credit card carrying a balance of $3,000.

Source: http://www.adelaidenow.com.au