CBA launches Australia’s second no interest credit card in as many days

CBA launches Australia’s second no interest credit card in as many days

Australia’s biggest bank, CBA, has announced a no interest credit card – the second of its kind in as many days.

The CommBank Neo card won’t be available for customers until late 2020. It will have credit limits of $1,000, $2,000 and $3,000 with no interest and no late fees or currency conversion fees.

The card includes a monthly fee based on the credit limit. However, there’s no fee if you don’t use the card and have a $0 balance throughout any given month.

This week, big four bank, NAB, launched the StraightUp no interest credit card with near identical terms and conditions.

With buy now, pay later services like Afterpay and Zip Pay attracting more than 5 million customers between them, the big banks have been forced to come up with a credit card to compete.

HOW DO THE BIG BANK CARDS COMPARE?

  CommBank Neo NAB StraightUp
Interest charges 0% 0%
Late payment fees $0 $0
Foreign exchange fees 0% 0%
Credit limits Opt for a $1K, $2K or $3K credit limit Opt for a $1K, $2K or $3K credit limit
Monthly fees $1K credit limit = $12 / mth

$2K credit limit = $18 / mth

$3K credit limit = $22 / mth

Waived if you don’t use the card and have a $0 balance.

$1K credit limit = $10 / mth

$2K credit limit = $15 / mth

$3K credit limit = $20 / mth

Waived if you don’t use the card and have a $0 balance.

Minimum monthly repayments 2% of balance or $25, whichever is higher. Between $35 and $110, depending on credit limit.
Where it can be used Anywhere Mastercard is accepted. Not for gambling or cash advances. Anywhere Visa is accepted. Not for gambling or cash advances.
Other Access to CBA’s Mastercard rewards program available to debt and credit customers N/A

Source: RateCity.com.au

RateCity research director, Sally Tindall, said: “These new cards signal it’s game on between the big banks and buy now, pay later."

“Hopefully this competition will bring more low cost, consumer-focused credit options to the table,” she said.

While CBA’s card is eerily similar to NAB’s, aside from the small variation in monthly fees, there are two key differences.

“The main difference between the two cards is NAB is asking customers to pay back more of their debt each month, which will see them clear it faster,” she said.

“The second difference is CBA offers shopping perks, but only if customers spend at certain stores.

“Customers should be wary: if they start buying things in a bid to claw back their monthly fee, then they’ve probably been had.

“Bank minds clearly think alike when it comes to tackling buy now, pay later.

“At this rate, Westpac and ANZ will have interest free cards on offer before the weekend’s out,” she said.

How do the new cards compare to buy now, pay later services?

  CommBank Neo card NAB StraightUp card Afterpay Zip Pay
Interest rate 0% 0% 0% 0%
Credit limit Up to $3K Up to $3K $2K $1.5K
Late fees $0 $0 $10 per late repayment. An extra $7 if you don’t pay in 7 days. Max fee 25% or $68 whichever is lower. A late fee of $5 applies after 21 days of not paying the minimum
Ongoing fees Up to $22 per month when in use or debt owing Up to $20 per month when in use or debt owing $0 $6/mth if you have money owing.
Where can you use it? Anywhere Mastercard is accepted except gambling and cash advances Anywhere Visa is accepted except gambling and cash advances Affiliated retailers only. Anywhere a credit card is accepted.
Repayment schedule 2% of balance or $25, whichever is higher. Minimum repayment of $35 - $110 depending on credit limit 4 instalments over 6 weeks Minimum repayment of $40.

Source: RateCity.com.au

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about credit cards

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.