Credit card rates still rising – here’s how to beat the crunch

Businesses using credit cards to help cashflow should beware – despite three consecutive cuts to official interest rates, at least five credit cards have actually lifted their interest rates in the past three months.

Businesses using credit cards to help cashflow should beware – despite three consecutive cuts to official interest rates, at least five credit cards have actually lifted their interest rates in the past three months.

Research from financial comparison firm InfoChoice shows GE Money and Wizard Home Loans lifted credit card rates by 2% or more in September. Bank of Queensland, Citigroup and Suncorp also lifted rates by up to 0.64%.

Not one credit card provider dropped rates by the full two percentage point cut from the official cash rate. The official cash rate now remains at 5.25% – its lowest point since March 2005 – but the average credit card rate remains just under 20%.

Cannex senior analyst Harry Senlitonga says while rising credit card rates are not desirable, providers are simply trying to shore up profitability.

“Credit card holders may or may not pay interest for months or months. Credit card issuers have to look at the pricing structure of the credit card to still be sustainable.”

But Senlitonga says that the vast number of small businesses that use credit cards to maintain cashflow need to shop around to make sure they have the best deal.

“Many small businesses use credit cards as a cashflow management system, but it’s important to see any other options they can explore to see if they can get a lower rate,” he says.

“The best deal 12 months ago may not be the best deal at the moment. It’s more hassle in switching when you have a business, but it’s a consideration they need to look at.”

But SmartCompany blogger Gail Geronimos says while the impact of credit interest rates on small businesses is huge, but there are a couple of tricks entrepreneurs can use to reduce their rates.

“Credit cards are great for your cashflow and emergencies. I phoned up my bank and said ‘I am thinking of changing my credit card, the interest rates are too high’, and got that interest rate down from 19% to 13%,” she says.

“To all SMEs; talk to your banks about getting your credit card down. Don’t threaten them, but negotiate. Say you’re thinking of moving and you’re not happy, and if they can do something you’ll think about staying with them.

“Banks want to hang on to customers right now. Credit cards a great source of fees and revenues, so they want to hang on to it. But it’s not my responsibility to make sure the banks are profitable. I’m not going to sit back and think about why they need to make money. I’m going to look after my own business.”