NAB raises the stakes in battle for credit card share

National Australia Bank has increased the competitive pressure in the credit card market, offering a zero rate on balance transfers and purchases for 12 months on all its cards.

Balance transfer and introductory purchase rate deals have been becoming more common and more generous over the past year. But it is rare for a card issuer to offer a zero rate on both balance transfers and purchases, as NAB has done.

According to comparison site Mozo, during 2014 there was a 50 per cent increase in the number of cards with zero balance transfer rates and an increase in the average balance transfer period of about two months.

Mozo said there was also an increase in the number of introductory purchase rate offers, with more set at zero.

Among the current deals in the market, Bankwest offers a zero rate for 18 months on balance transfers to its More card, while Citibank offers a zero rate for 15 months for purchases on its Citibank Platinum card.

In December, G&C Mutual Bank (formerly SGE Credit Union) launched a 12-month zero rate balance transfer offer combined with a 9.9 per cent purchase rate.

Virgin Money is offering a zero rate balance transfer deal for 14 months on its No Annual Fee card.

Shrinking credit card balances are forcing issuers to sweeten their offers as they try to generate some growth in their card portfolios. Zero rate balance transfer deals are aimed at consumers who want to pay down accumulated credit card debt (see following story).

NAB executive general manager of consumer lending, Angus Gilfillan, said in a statement: "Many customers are looking to get on top of their personal finances at this time of year and this new offer could help them achieve that goal."

NAB is pitching a scenario where a customer transfers a A$5000 balance to a NAB card and makes regular purchases of $500 a month; the customer would save $1500 of interest in the 12-month offer period.

ANZ ran an aggressive balance transfer deal throughout most of last year, offering zero interest for 16 months on its Low Rate, Low Rate Platinum, First and Platinum cards.

Westpac offers a range of balance transfer and introductory purchase rate deals, including zero on purchases on its Low Rate Card for 12 months.

Issuers are keen to build up their credit card portfolios because arrears rates are low and margins are high. However, business has been slow.

The latest Reserve Bank figures show that personal credit balances grew by just 1.1 per cent over the 12 months to November. Balances accruing interest on credit and charge cards fell by 1.7 per cent over the same period.