Credit card users don't care about charges

Though banks charge credit card borrowers up to 20 per cent interest, most people do not know -- or care -- how much their cards cost them, a Massey University study has found.

The director of Massey's department of finance, banking and property, David Tripe, said researchers had set out to discover how credit companies were able to charge interest rates as high as 20 per cent.

The survey revealed most people did not know how much they were being charged, and those that did, were often powerless to do anything about it anyway.

Researchers also concluded the lack of competition in the credit card market meant issuers were free to charge what they liked.

New Zealanders' credit card borrowing ballooned from about $1.5 billion in 1996 to more than $3.5 billion in 2003.

The amount attracting interest rose from $1.1 billion to $2.5 billion in the same period.

Mr Tripe said up to 80 per cent of cardholders surveyed described the amount of interest they were paying as "a trivial issue".

Sixty five per cent did not know what their card's current interest rate was and 59 per cent did not know what fees they were paying.

Around a quarter of credit card users paid monthly interest charges but most only had "relatively small" credit card debts.

People were generally aware that paying off the full balance was the most efficient way to operate, and around 50 to 60 per cent of credit card holders avoided interest and penalty charges in this way.

The study also identified a lack of competition in the New Zealand credit card market, and "little incentive" for banks and other issuers to reduce interest rates.

"Reasons may include the low proportion of customers actually affected, and the need to cover the costs of providing the products," researchers said.

- NZPA