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Credit card payments rise - so do fees

Monday, May 16, 2008

AUSTRALIANS are paying down more of their credit card debt, but being slugged with higher fees for using them.

Reserve Bank data shows that credit card fees have risen 170 per cent in the past five years. But this hasn’t curbed Australians appetite for credit, with the number of credit and charge accounts rising by 65,000 in March to 112.9 million.

Total repayments of credit card debt rose by 5.4 per cent to $17.67 billion in March, from $16.77 billion in February. This helped pushed down total credit card debt to $43.04 billion, from $43.25 billion in February.

The number of purchases on credit cards in March increased 3.2 per cent to 112.87 million transactions worth $16.06 billion, down from $16.46 billion in February.

The Reserve Bank’s annual review of bank fees showed that total fee income from credit cards used by householders rose 12 per cent in the last financial year, and 170 per cent over the past five years.

For the year, credit card transaction fees, including cash advances, were up 12 per cent, while account servicing fees rose 11 per cent. Credit card penalties and foreign

Consumer watchdog Choice, which is campaigning against bank penalty fees is unhappy that penalty fees of up to $40 are being imposed on card holders.

"The telling statistic is that the fee income from over-limit and late payment fees and foreign currency fees on credit cards recorded the fastest growth, increasing by 16 per cent in 2007," said Choice senior policy officer Elissa Freeman.

She went on to say that while some banks have reduced fees, the data suggested that consumers were being hit with penalty fees more often.

But the Australian Bankers’ Association said the main driver behind higher credit card fees in recent years was a reduction in credit interchange fees in 2003. An interchange fee is the fee that banks charge each other when someone uses a credit card. It involves a payment from the shop owner’s’bank to the shopper’s bank at an agreed rate.

The ABA said it warned at the time that reducing interchange fees would flow on to higher fees for consumers, but that Choice still backed the reform.

The association has released a fact sheet on how customers can avoid or reduce bank fees.

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