Westpac Cuts Credit Card Rates
Westpac on Tuesday announced that in the run up to Christmas, its customers would be receiving the added bonus of lower interest rates on selected credt cards issued by the bank. Westpac is planning on cutting the interest rate on some of its cards by up to 1.25 per cent.
The major banks have been under sustained political pressure to cut interest rates on $40 billion of credit card debt. While this month’s 100-basis-point reduction in official interest rates was quickly passed on to mortgage customers, the banks have been slower to cut their credit card rates.
They have attempted to justify this on the grounds that credit card debt is unsecured, and therefore riskier.
National Australia Bank’s Australian chief executive Ahmed Fahour created controversy last week when he said card rates were a “sideshow” compared with the vastly larger sums at stake in other forms of lending, such as $1 trillion in residential lending and $500 billion in business lending.
Westpac announced yesterday, at the same time as raising $2.5 billion from institutional shareholders, that it would reduce the purchase rate on its Virgin credit card by 125 basis points to 12.99 per cent, from next Monday. The rate on the Altitude card will be cut by 100 basis points to 18.99 per cent, while various business cards will be lowered by 80 basis points. Westpac’s interest rate reductions will come into effect on Monday, December 15.
Westpac said it had reduced rates on some consumer and business cards by 175 basis points since September. There have been calls for the banks to reduce their credit card interest rates as the Reserve Bank of Australia has cut its overnight cash rate by three percentage points since September to 4.25 per cent from its peak of 7.25 per cent.
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