Credit card interest rates remain in some cases more than 20 per cent despite the cash rate sitting at a record-low two per cent. Source: News Limited

The plastic market will come under intense scrutiny with an examination of how and when interest is applied to credit cards and also how minimum monthly payments levels are set.

The inquiry will be held by the Senate Economics References Committee and will look at how interest rates interact with the Reserve Bank of Australia’s cash rate and also the card fees at the point of sale and at ATMs.

‘ATM fees ... are extortionate’ ... Labor Senator Sam Dastyari, chair of the Senate Economics References Committee, who is looking into the rates charged. Source: News Corp Australia

Credit card interest rates have failed to fall in recent years despite the cash rate plummeting to its lowest-ever level of two per cent.

In many cases plastic interest rates are higher than 20 per cent.

CBA DEFENDS RATES ON CREDIT CARDS

The issue relating to credit card number portability which would easily enable cardholders to change banks while maintaining the same credit card number will also be examined and card loyalty programs.

The Senate Economics Committee chairman and Labor senator Sam Dastyari said consumers were “fed up” with excessive fees and wanted the banks to justify them.

“ATM fees of up to $3.80 per transaction are extortionate,’’ he said.

“Especially for people in remote areas who aren’t surrounded by of ATM’s, a $2 fee on a $20 withdrawal is 10 per cent fee for no service whatsoever.”

He criticised the banks for being quick to pass on interest rate rises when there were cash rate hikes but were slow to pass on any cuts.

Australian Bankers’ Association’s chief executive officer Steven Munchenberg said the banks were more than happy to appear before the inquiry.

“We’re more than happy to explain the realities of how interest rates on credit cards operate and to explain the costs of providing ATM services,’’ he said.

“We will use the opportunity to present the reasons behind these things very clearly.”

sophie.elsworth@news.com.au