Banks are luring customers in with tempting credit card introductory offers, but annual costs can jump by as much as $676 once the honeymoon period is over.
Finance comparison site Mozo investigated 80 credit cards with initial fee discounts or promotional periods in the leadup to a Senate Inquiry into credit card interest rates.
It found the highest ongoing annual cost after the interest-free period was a staggering $1,376 for a Platinum card, while the lowest was just $326, based on an average spend of $3,261.
"Unfortunately, honeymoon offers are often marketed on the most expensive credit cards, while low-rate credit cards rarely have these sweeteners attached," Mozo Director Kirsty Lamont said.
Ms Lamont said this sort of marketing creates a double whammy of danger for cardholders, who are tempted to spend big without learning the discipline of paying off purchases each month.
"This can leave unsuspecting cardholders with huge debts to pay off once the honeymoon period is over, at revert rates of up to 20.74 per cent," she said.
Labor and crossbench senators have established a November inquiry into credit card interest rates, as the gap between card rates and the cash rate stands at a record high.
While the Reserve Bank has slashed its cash rate by 275 basis points since 2011 to an all-time low of two per cent, the average standard credit rate remains relatively unchanged at 17.57 per cent.
Consumer advocacy group Choice says the big four banks are conning consumers, by offering introductory low-rate deals on cards that revert to high-interest ongoing rates.
"Interest rates on ANZ, Commonwealth Bank, NAB and Westpac low rate credit cards have moved by less than one per cent over five years, with most increasing rates from 2013," Choice campaigns manager Erin Turner said.
She said the only major lender that hadn't hiked the interest rate on its low-rate card was Westpac. But it had kept its rate static for five years, at 13.49 per cent, despite the historic drop in the cash rate. And that still made it poor value.
Ms Turner advised people to seek a better deal through credit unions and smaller lenders, saying the best rate available was 8.99 per cent offered by Community First Credit Union.
"Don't trust the big banks when it comes to credit card marketing," she said.
"Credit cards are high cost products and if you have a card with a big bank you'll pay up big in interest and fees," she said.
THE FACTS ON YOUR PLASTIC
* 40pct of credit cards have an intro offer (either a discounted purchase rate or annual fee)
* 0pct purchase rate offers were often the more expensive down the track
* Only five of the top 20 lowest cost credit cards have an intro offer
* On average, a credit card costs $685 to maintain each year
* The average credit card rate is currently 17.57pct (lowest is 8.99pct, highest is 23.5pct)
* There are almost twice as many intro purchase rate offers than in 2011
(Source: Mozo)
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