Banks Asked To Ditch Card Fees

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Banks Asked To Ditch Card Fees

Illawarra Mercury

Friday November 10, 2006

By JULIAN MURPHY

CONSUMER and welfare groups have urged banks to dump hefty credit card penalty fees following the latest interest rate rise.

The third rate hike this year has led to fears household debt levels will be pushed to breaking point.

According to St Vincent de Paul, Australia's credit card debt level has skyrocketed from $16.4 billion to $36.6 billion in five years.

There are 13.1 million credit cards in use across the country.

Many financial institutions charge cardholders heavy penalty fees and higher interest for exceeding credit limits or making late payments (see box left).

Consumer watchdog Choice believes Wednesday's 0.25 percentage point interest rate rise will hurt more Australian families leading into the holiday season.

Interest rates have now risen one percentage point since March 2005, adding $150 a month to the average mortgage repayment.

"Credit card debt is often where most people first feel the impact of a rate hike," Choice financial services officer Nick Coates said yesterday.

"We feel the fees imposed are unfair as they are excessively high compared to the cost to banks for their customers being overdrawn."

He said suspending these additional costs would help people manage their debt levels.

"There needs to be some respite because fuel prices coupled with inflation and the rate rise is making things very hard," he said.

"There is an opportunity for banks to show compassion."

An increasing number of South Coast families are battling spiralling debt levels.

Mission Australia South Coast services manager Barbara Jones said many were juggling multiple credit card repayments and a moratorium on penalty fees would make an enormous difference.

"People take out more cards to try and get the problem under control but it just compounds it," she said.

IMB CEO Wayne Morris agreed some money lenders needed to be more accountable.

"Loans shouldn't just be handed out to anyone," he said.

THE DEBT TRAP

Some of the penalty fees:

? Over-the-limit fees ($25 to $40): Charged when a credit card limit is exceeded. Interest rate rises can push consumers beyond credit card limits.

? Late-payment fees ($15 to $35): Charged if a credit card payment is not made in time.

? Penalty interest rates: Higher interest rates charged after a consumer fails to make a repayment.