Latest Reserve Bank of Australia figures reveal that Australians owe a staggering $50 billion on credit cards. Worryingly, $32.8 billion of that is accruing interest.

These figures are so alarming even the financial institutions raking in the interest are working to reduce the debt! For, as they say, it’s in no one’s best interest for debtors to declare bankruptcy.

Lenders like Bendigo Bank, Bankmecu, Bankwest, and the Victoria Teachers Mutual Bank are among the many who have (finally) dropped their rates.

Last month the RBA dropped its cash rate to a near flat-lining 2.25 per cent. Traditionally banks are loathe to pass on interest rate cuts – preferring to take the difference between what they charge and what they pay as pure profit.

But now the option of bankruptcy is becoming a real alternative for many. Faced with this, lenders would prefer to make less from borrowers rather than nothing at all, and so are lowering their rates.

Many credit card holders continue to suffer punitive interest rates as high as 23.5 per cent!

Think about that for a moment: The money used to fund the credit card is borrowed by the lender from the RBA at 2.25 per cent. It is then lent out to you at the extortionate rate of 23.5 per cent!

These lendrs deserve to lose their customers.

RateCity (a comparison website) ranks the interest rates on 195 credit cards. They vary in their terms, conditions, and interest rates – with some as low as 8.99 per cent.

Low-end cards vary between 8.99 and 14.99 per cent (still a lot better than 23.5%).

“If you are on one of those higher end low-rate cards,” said Peter Arnold from RateCity, “then you can switch cards a lot easier than you can switch your home loan.”

But be sure the new card fits what you’ll use it for. Not all cards are accepted everywhere, there’s more to a credit card than just the interest they charge.

But if a card suits your purchasing patterns then be sure to do everything you can to pay it off each month.

For those with a pre-existing outstanding debt – Be sure to pay off more than the minimum amount each month; doing this can reduce the amount you pay in interest quite substantially.

Those who recognise they cannot be trusted with credit need to switch to a debit card. Once the money runs out on these – it’s gone.

Another ingenious way debtors are saving money on interest is through balance-transfer deals. Here debtors switch to a card with a zero per cent honeymoon offer and use this period to reduce their debt.

Dennis Bice says that more customers are shopping around for better deals. Bendigo Bank, he says, cut the rate on five of their cards by up to one per cent just to remain competitive.

“The interest rate is a key component, but it’s not  (the only) thing in the whole process,” said Bice.

“People really need to understand what they want the crd for and how they actually use it. That will reflect the type of card they actually get.”

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