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Doesn't know what he doin
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Uber Geek
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Topic # 180703 18-Sep-2015 14:42
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So I've just noticed that the interest rate on my ASB Visa Classic has gone up by 1% in July, never heard a thing about it. I've looked on a few banks websites and they're all now selling credit cards with 20.95% instead of the usual 19.95% rate (which it had been since I got my first credit card like 4 years ago. )  

I'm just a bit confused now. I've seen in the news that the official cash rate or interest rate or something like that had dropped, which caused mortgage interest rates to drop quite significantly as well. Since that started happening, my interest rate on savings with RaboDirect has dropped quite a bit too, I get an email nearly every month now telling me the rates have changed. So if interest rates for lending and saving have gone down, why are credit cards going up?

I'm not annoyed by it since I pay it in full each month usually, but I thought I roughly understood how interest rates worked which now I obviously don't lol. Keen to know what I'm missing. 


edit: formatting

Bachelor of Computing Systems (2015)




Late 2013 MacBook Pro with Retina Display (4GB/2.4GHz i5/128GB SSD) - HP DV6 (8GB/2.8GHz i7/120GB SSD + 750GB HDD)
iPhone 6S + (64GB/Gold/Vodafone NZ) - Xperia Z C6603 (16GB/White/Spark NZ)

Sam, Auckland 

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70 posts

Master Geek
+1 received by user: 40

  Reply # 1389733 18-Sep-2015 14:50
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Credit Cards aren't a competitive product for banks, unlike mortgages, which makes banks a lot more money.

Basically there's no incentive for banks to lower the normal credit card rates, they already all offer their low/no interest on transferred balances as a way to steal customers from other banks. 

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Uber Geek
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  Reply # 1389735 18-Sep-2015 14:52
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Because they can, would be my guess.

 I suspect it's more to do with demand for credit from consumers than the OCR.
Then again, lower OCR = lower mortgage rates = more money in people's pockets = less demand for credit, so there goes that argument.


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Ultimate Geek
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  Reply # 1390145 19-Sep-2015 11:11
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Will also be to cover the cost of risk on credit cards. Given they are unsecured, c/card bad debt costs up to hundreds of thousand of dollars every month (was in the tens of thousands for just 1 bank when I left their c/card centre in 1994).

That cost of risk has to be covered by someone, unfortunately its the end users.

I do think credit card debt is simply too easy to get and to get out of control with, but they fulfil our "must have it now" mentality.

If you aren't disciplined and paying it off each month, definitely look around for the "swap your card to us" deals and take advantage of as many as you can to not pay interest. Only stop using the bloody things while you are paying off the debt. 

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  Reply # 1390223 19-Sep-2015 13:44
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Having a revolving credit component on our mortgage work very well. All possible costs paid on credit card, salaries into the revolving mortagage. Credit cards paid off in full each month, no interest and _alot_ of card points.


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  Reply # 1391755 22-Sep-2015 11:36
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ASB do a low rate Visa credit card, its 13.5% i think.  You don't get any points for anything but its a lower rate.

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