Even as international travel returns, the perks associated with premium credit cards might be hard to justify against the benefits of changing to a lower rate.
An analysis of Australia’s credit card industry by Mozo has suggested that a mass switch by Australians from high-rate to low-rate credit cards could reduce the national level of credit card debt by $1.66 billion each year.
“At a time when travel linked rewards on high interest rate credit cards are still struggling to take off, it can be hard to get value through this premium card category,” Mozo spokesperson Tom Godfrey said.
Mr Godfrey said that the conditions of the pandemic have made it difficult to get access to the benefits that typically come attached to the premium card category, leaving consumers with the sting of a high-interest rate and little else to show for it.
“Although it might change as international travel becomes widely available, at the moment it’s still hard to justify paying skyhigh interest rates on premium credit cards,” he said.
When it came to the cost of premium credit cards, Mozo’s analysis of the playing field found that the highest interest rate was 24.5 per cent, the lowest was just 7.49 per cent, and the average was around 17 per cent.
In addition to the lack of access to the perks that usually come with a premium credit card, Mozo also called out the rising prominence of Buy Now, Pay Later apps among consumers.
Recent months have seen more and more traditional Australian banks put their own spin on zero-interest and instalment-based credit.
“With many Australians switching to buy-now-pay-later, paying down debt and unable to get as much value through rewards programs, credit cards are not getting the workout they have previously,” Mr Godfrey said.
As the holiday season approaches, he called on consumers to think about how changing their credit cards might help them get on top of outstanding debt sooner rather than later.
“If you’re carrying a balance forward on your premium credit card, something as simple as switching to a leading low rate card may reduce your monthly interest repayments and could help you pay down your debt sooner,” he said.
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