Credit cards debts being paid off faster
Consumers are turning their backs on credit cards, rushing to pay down card debts at the fastest pace on record.
It comes as figures show banks have passed on only a fraction of recent Reserve Bank interest rate cuts to credit card customers, with personal and car loans mirroring a similar move.
In a sign households remain debt-shy, the average credit card balance slumped 2.4 per cent to $3256.70 in the year to March, Reserve Bank figures showed on Monday.
The average balance that is accruing interest fell even more sharply, by a record 5.7 per cent to $2294.30, according to CommSec economists, the biggest annual fall since such figures began in 2002.
The rush to pay down credit card debt coincides with banks reducing card interest rates by an average of only 0.12 percentage points since late 2011, compared with a 2 percentage point cut in official rates set by the Reserve Bank.
Banks have also failed to pass on official rate cuts to people with personal loans.
Figures from Canstar show personal loan interest rates have fallen just 0.78 percentage points since October 2011 to 14.68 per cent, less than half the reduction in official rates over this period.
Car loans rates offered by the big banks have fallen by even less, dropping 0.58 percentage points, to 14.73 per cent.
Canstar analyst Joshua Zenas said interest rates on personal loans came under less public scrutiny than mortgage rates, which made the market less competitive. Also, he said, borrowers did not shop around for personal loans as thoroughly as for home loans.
"Mostly, they are comfortable staying with the bank they are with."
The profits from personal loans are worth millions to banks. About $1 billion in new car loans is issued each month, and personal finance commitments are worth more than $7 billion a month.