Will the interest rate rise affect your credit card repayments?
By Sam Gooch
Dec 3, 2009 - 11:55:06 AM
The RBA has decided on a further interest rate hike this month.
Australians' credit cards balances could be set to change as a result of a recent Reserve Bank of Australia decision.
The Monetary Policy Committee met this week and decided to increase the official interest rate by 25 basis points, taking it to 3.75 per cent.
For the third consecutive month, the RBA has decided to raise the base rate from 50-year historic lows that were implemented as the global financial crisis struck.
In a statement issued by governor of monetary policy Glenn Stevens, the reason cited was that the country's economy has resumed growth.
Credit, including that for housing, is expanding at a "solid rate", he said, going on to add that property prices have also risen "significantly".
Furthermore, there has been an improvement in labour market conditions, which is expected to result in a lower unemployment peak than previously forecast.
Similarly, inflation has eased from its high point last year, Mr Stevens explained - and it is anticipated that it will be maintained at a moderate level in the near-term.
"In Australia, the downturn was relatively mild and measures of confidence and business conditions suggest that the economy is in a gradual recovery," Mr Stevens said.
When it comes to spending on credit cards this Christmas, shoppers may want to take the interest rate into account.
A recent article from news.com.au drew from the opinion of several experts, including Credit Union Australia chief executive Chris Whitehead.
While it may be advisable to aim for a product with 0% interest on purchases included in their credit card terms, others may benefit from simply reducing their limit to ensure that they do not over spend.
Mr Whitehead warned against being complacent since economic forecasts suggest next year, the country's finances will improve.
"If you know you are susceptible to excess credit card spending, lowering the limit on your card is a smart option," he commented.
He went on to advise that people make sure the end of their interest-free period does not coincide with increased base rates and home repayments.
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