Gerard Cockburn* says as young spenders turn their backs on high debt-accruing products, Commonwealth Bank has hastily launched a new no-interest credit card.
People may have differing opinions when it comes to credit cards, but in reality, the rules behind managing a credit card are the same.
Commonwealth Bank has hastily launched a new no-interest credit card in a bid to attract younger spenders turning their backs on high debt-accruing lending products.
For a monthly fee ranging between $12 and $22, CBA’s new CommBank Neo card provides customers with a credit limit of up to $3000, attracting zero-interest, no annual or late fees and no foreign currency charges.
The new card offered by Australia’s largest retail bank, also gives customers a range of discounts and cash-back offers through CBA’s loyalty rewards program.
Retail banking executive Angus Sullivan said the card was a response to younger consumers having less of an appetite for traditional credit products, which could cause debts to blowout through high interest fees.
Traditional credit cards can attract annual interest rates anywhere between 10 per cent to nearly 25 per cent.
“It is a card to make payments,” Mr Sullivan said.
“This is far more expansive than the category label of credit cards.”
CBA’s latest payment product comes one day after rival bank NAB announced the first ever no-interest credit card in the Australian personal lending market.
The venture into no-interest incurring loans by both banks coincides with a boom in buy now, pay later lending platforms such as Afterpay and Zip, which are enabling consumers to purchase goods and services through instalment payments that do not incur interest fees.
‘This hybrid space provides much more flexibility to use and pay back over a time which is more convenient for them (consumers),” Mr Sullivan said.
“The buy now, pay later space is very constrained to four payments over a 55 day type of contract.”
NAB group executive for personal banking Rachel Slade said on Wednesday credit cards had not evolved with the growing shift towards debit spending.
Both CBA and NAB’s new cards do not charge consumers monthly fees if the card is not in use for a respective month.
Mr Sullivan said the bank’s decision to offer cash-back rewards for shopping at certain merchants meant consumers were able to recoup the cost of the monthly fee.
The card’s minimum monthly repayment is $25, or 2 per cent of the closing balance, whichever is greater.
Monthly fees for the card are $12 for a $1000 limit, $18 for a $2000 limit and $22 for a $3000 limit.
ANZ and Westpac have not revealed whether they will offer no-interest credit cards.
*Gerard Cockburn is a business reporter.
This article first appeared at news.com.au
