Credit card bills are causing angst for hundreds of thousands of Australians. Picture: Thinkstock

FOR the first time the extent of the credit-card rort can be revealed, with official data showing households are paying an extra $2.3 billion in interest compared to a decade ago.

New figures obtained from the Australian Prudential Regulation Authority show a 70 per cent increase in the price of paying with plastic.

The main reason for the rise — from $3.1 billion in 2004 to $5.4 billion in 2014 — is the average credit card interest rate has kept on rising even though the Reserve Bank of Australia cash rate has plumbed new lows.

The gap between the two has nearly doubled since 2004, prompting a Senate economics committee inquiry that will take evidence from banks this week.

Inquiry chairman, Labor senator Sam Dastyari, told News Corp Australia the new information on interest costs supported the “hunch” that led to the inquiry.

What David Koch and Ross Greenwood told the inquiry

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Financial gurus ... Ross Greenwood and David Koch appear before a Senate enquiry into credit cards. Picture: Toby ZernaSource:News Corp Australia

Senator Dastyari said he believed banks had been hoping no-one was paying any attention to the “big jump in money” they were making from credit cards, particularly since 2011.

“Australians are being ripped off,” he said.

Inquiry deputy chairman, Liberal senator Sean Edwards, said: “The committee has heard competition in the credit card market isn’t having much impact on interest rates which continue to rise, even while the cash rate drops. I look forward to hearing from industry as to why this appears to be so.”

Joel Gibson, campaign director at One Big Switch, which is running the Big Debt Switch to lower credit card interest bills, said the national credit card bill was like a “termite colony inside family budgets, multiplying and eating away at funds that should be spent on more vital things”.

“The reason 50,000 households have joined this campaign is that they are sick of sky-high credit card interest rates and they want to do something about it,” Mr Gibson said.

“Hopefully we can drive people to shop around en masse and see if they can save hundreds of thousands of dollars in interest payments between them. That would be real people power.”

The inquiry’s hearings will resume on Tuesday in Canberra when it will hear from witnesses representing NAB, the Australian Competition and Consumer Commission, Treasury, American Express and MasterCard.

The Australian Bankers’ Association will also testify. In its submission to the inquiry the ABA said credit cards offer a “strong value proposition” and that interest rate gaps don’t tell the whole story.

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Credit card interest we paid

2004: $3.1b

2014: $5.4b

Average standard credit card rate

2004: 16.5%

2014: 19.7%

RBA baseline ‘cash’ rate

2004: 5.25%

2014: 2.5%

Gap between credit card and RBA rates

2004: 5.7%

2014: 10.6%

Sources: APRA, RBA

For more on the Big Debt Switch, go to www.onebigswitch.com.

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