Big Four bank offers no-interest credit card

Simplicity and transparency promised as analysts say ‘do the maths’.

no interest credit card

Big Four bank NAB has launched a no-interest credit card that analysts say is a response to the rapid growth of Afterpay services.

While most regular credit cards charge up to 20 per cent interest on purchases after the interest-free period, NAB says its world-first StraightUp card will never charge interest.

Instead, users must pay a minimum monthly amount that is dependent on the credit limit plus a monthly fee. NAB says there are no late fees and no fees if the card is not used.

On a card with a $1000 credit limit, the customer must repay a minimum $35 per month and incurs a $10 monthly fee which is included in the balance. For a card with a $2000 credit limit, the minimum repayment is $75 per month, with a $15 monthly fee. On a $3000 card, the minimum repayment is $110 per month with a $20 monthly fee.

NAB Group executive-personal banking Rachel Slade described the card as an innovative way to provide Australians with credit.

“We started with a straightforward idea – to create a card with no interest, no annual fees and no late payment fees,” she said.

“This is the result – a simple, easy-to-understand credit card that can be used anywhere Visa is accepted online or in store.”

Ms Slade said the card had been developed to cater for Australians wanting more control over their finances.

“A lot of young customers don’t have credit cards because they don't like the unpredictability of them. This addresses the things that make them cautious. Customers want certainty and predictability of repayment. It's got no surprises.”

Patrick Veyret, banking policy specialist at consumer group CHOICE, says the announcement is a step in the right direction in a sector that needs reform.

“For too long, banks have profited from the complexity of credit cards,” he says. “The interaction of annual fees, different interest rates for purchases and cash advances, interest-free periods and minimum repayments make it hard for people to understand what they are really paying. That sees many people trapped in a cycle of debt.

“While this product won’t be right for everyone, it’s a lot simpler to understand than most credit cards.

“Importantly, this new card will be subject to responsible lending laws, unlike buy now, pay later products like Afterpay that have been designed to exploit legal loopholes.”

Sally Tindall, director of research at RateCity, said potential users should do the maths and factor in the monthly fee.

“It is likely to appeal to someone looking for access to credit with training wheels, as they won't get into a debt spiral, someone who wants to put it in a bottom drawer for an emergency, or someone wanting to make a one-off purchase and pay off over time.

“But it won't be for regular use, or for those who are fastidious about paying off debt.”

Website savings.com.au offers the following analysis of the card.

“Although an interest-free credit card might sound great in theory, it's important to look at how much the fees may sting you.

“If you were to spend $1000 with a $3000 limit and took 12 months to repay this, you’d be charged $240 in fees, at an effective rate of 41.70 per cent.

“In comparison, if you were to take 12 months to pay $1000 off a credit card with no annual fee and an interest rate of 15 per cent, you'd be charged around $84 in interest.

“So the interest-free card would actually cost $156 more than a regular credit card in this specific example.”

Australian Financial Review banking specialist James Eyers says the StraightUp card is another example of growing competition in payment options after PayPal entered the instalment market. He says it is likely to put pressure on the likes of Citi, Latitude and Macquarie to experiment with their offerings.

Visa's group country manager in Australia, Julian Potter, said Australians’ appetite for credit remained strong, but there was a growing demand for “enhanced transparency, certainty and simplicity”.

“The NAB StraightUp Visa card provides these qualities and given Australians’ tendency to embrace new ways to pay and manage money, we expect it to be welcomed into the market.”

NAB chief executive Ross McEwan is set to appear before a House of Representatives economics committee on Friday, along with the CEOs of CBA and ANZ, to talk about pressures on credit card portfolios.

The Australian Securities and Investments Commission (ASIC) said in a 2018 report that credit cards were a debt trap for more than one in six consumers who used them.

Reserve Bank data released earlier in the week shows that during the pandemic customers have shifted away from credit cards in favour of debit cards and are paying their credit card balances faster.

It says there has been a 10 per cent drop in the number of credit cards on issue in the 12 months to the end of July and a 14 per cent fall in the value of transactions.

CommBank has launched a similar style no-interest credit card product today.

Do you see value in the NAB StraightUp card? Do you believe there is “enhanced transparency, certainty and simplicity”?

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    COMMENTS

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    pedro the swift
    11th Sep 2020
    11:16am
    So they have found another way to rip customers off.
    Mariner
    11th Sep 2020
    2:26pm
    Most probably do not need to qualify for it so it suits everyone, even irresponsible people.
    Karl Marx
    11th Sep 2020
    11:39am
    The best way is to educate people on how to budget & cut back spending so credit card debt & household debt is reduced to a minimum or better still zero.
    So instead of an "interest rate" they charge a "monthly fee" which from the example given works out a 3 times more. Good old banks thinking about their customers at last rofl.
    Koro
    11th Sep 2020
    11:52am
    Wouldn't touch it - utilise my visa card and pay out the full balance each month no interest - why change when pay only 1 x annual fee for this service and always budget to enable full monthly payment of expenditure.
    Horace Cope
    11th Sep 2020
    11:59am
    Do you see value in the NAB StraightUp card? Do you believe there is “enhanced transparency, certainty and simplicity”?

    I see no value in an "interest free" card that charges a fee which, as shown, can amount to an equivalent 41.7%. Those with little knowledge of how this card actually works will be dazzled by the promotion of "interest free" and may finish up a lot worse off than what is being used at present. Obviously there is no “enhanced transparency, certainty and simplicity” as the costs are hidden, there is uncertainty as to what the actual cost may be and it takes a mathematician to work out the complicated formula. Another example of marketing people being let loose on an area over which they have little knowledge and a Board being blinded by marketing rhetoric.
    Nan Norma
    11th Sep 2020
    1:28pm
    I have had a credit card since 1992. I use it all the time. I have never paid fees and in all those years I have paid a total of $3 interest (my own stupid fault). Credit cards are very useful if used properly. Don’t condemn the card, condemn the user.
    Mariner
    11th Sep 2020
    2:24pm
    Got mine in 1978 for a bank card as it was then called. I have used cards since but bank card was replaced by Visa because you could not even use it in NZ. Now I pay for a basic card with Visa, am charged $30 per year and always have a positive balance (I make sure of that) and have never paid any extra fees. Of course I do not accrue points for airlines, pressure cookers and micro waves either. Certainly would not change it for one of those interest free cards mentioned above. Banks' answer to After Pay's success story.
    Darts44
    11th Sep 2020
    4:32pm
    Credit cards are very useful if used properly. That is correct. It is my way of using it.
    ImOKJack
    11th Sep 2020
    2:36pm
    Put the scissors through all my CC's a few years ago and haven't looked back. I actually have more money back in my pocket, better mine than theirs (the banks). My motto: If I can't afford to buy it I go without until i have the money. Besides there are other options for purchases. ie. LayBy is my prefered
    BillW41
    11th Sep 2020
    3:24pm
    Fees but no interest? Sounds like Sharia banking to me! The thin edge of the wedge....
    I refuse to have anything to do with cards that charge fees of any sort, and I operate four.
    As I've said before, only use fee-free cards and pay them off every month. It's the only way.
    Eddy
    11th Sep 2020
    4:01pm
    My wife has had a fee-free Mastercard from Westpac for years, as long as she/we pay the balance every month we do not pay a brass razzoo in interest, fees or charges. She actually started it so she could have a second card in our daughter's name when our daughter went backpacking in Europe in the late 80s and, for safety sake, had a small credit limit. it was my daughters 'emergency' card in case anything went awry (which fortunately it didn't).
    old fart
    11th Sep 2020
    7:26pm
    Eddy you are correct. Westpac do have a Mastercard with no Annual or Monthly Fees. They do however charge interest if you do not pay the monthly statement balance in full. You can effectively use "free Bank" money without any Interest & Charges up to 60 days, if for example, you wanted to purchase a big ticket item just after your last statement was issued. You would then receive a statement in 30 days time & then have another 30 days to pay it off in full
    Maggie
    11th Sep 2020
    10:01pm
    Who said transparency and simplicity???????
    Sure there's certainty - that the bank will come off better than before.
    Fair Dinkum
    12th Sep 2020
    6:43am
    This is almost fraud by the banks to get the uneducated in money matters to borrow money .like explained in this article a normal credit card has less fees and if you cant pay of the amount owed each month you should not have a credit card


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