CONSUMER advocacy group CHOICE has welcomed Senate recommendations designed to help Australians escape the credit card debt trap.
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The Senate's Economic References Committee made recommendations including enhanced disclosure requirements and opened the way to legislated minimum repayments designed to dissuade people from parking debt on credit cards in the long-term and racking up huge interest costs.
The committee heard that about 40 per cent of Australian adults have at least one credit card and at the end of June, Australians had a total $51.5 billion in credit card debt.
There is a 15.5 per cent interest rate gap between the lowest rate card, the Quay Credit Union Visa Card, and the highest, the GE Money Mastercard at 23.5 per cent.
When card fees are added into the equation, there is a 17-20 per cent gap between the cash rate and the headline credit card interest rates for major bank cards.
The committee has recommended reforms including the prominent display of ongoing headline interest rates on card advertising and on monthly statements, and a simpler, on-line card cancellation process which would avoid hard-selling representatives.
"The big banks have failed credit card customers for years, spruiking poor value and confusing products which can leave consumers locked into crippling cycles of debt," CHOICE campaigns manager Erin Turner said.
"The fact is not one of the big four banks has a credit card in the top 20 by interest rate, yet they continue to dominate the market.
"Clearly there is a major problem with the way these cards are marketed and sold.
"If the committee's recommendations are taken up it will be a major win for Australian consumers, making the credit card market fairer, more competitive and more transparent."
She said simpler card cancellation would be a significant step forward.
"Right now, customers trying to cancel cards are often left frustrated and confused, given the run around by pushy retention teams and upselling."
In September, CHOICE released a survey showing 43 per cent of Australians were worried about their level of mortgage and credit card debt.
"Complex cards are designed to distract consumers from very high interest rates by putting the focus on rewards schemes, interest free periods, balance transfers and low annual fees," Ms Turner said.
"There's still a long way to go, but the committee's recommendations are a welcome step towards fixing the power imbalance between the banks and their customers."
