Mixed review for zero rate credit cards

John Kavanagh

Comparison sites have given mixed reviews to the two no-interest credit cards that were launched last week, NAB’s StraightUp and CBA’s Neo.

A clear advantage is that the cards will be accepted everywhere, unlike buy now pay later products. Another is that consumers can pay off their purchases over longer periods.

However, both cards have monthly fees that are charged on a “no use, no pay” basis, which means there is no fee as long the card is not used and has a zero balance.

When they ran the numbers, the comparison sites found that consumers might be better off using a no annual fee credit card with a low rate.

The two offers include no interest charges, late fees or foreign currency fees. Both offer $1000, $2000 and $3000 limits.

CommBank Neo’s monthly fees are $12 for customers with a $1000 limit, $18 for customers with a $2000 limit and $22 a month for customers with a $3000 limit (the maximum limit available).

Minimum repayments are $25 or 2 per cent of the balance, whichever is greater.

NAB StraightUp’s monthly fees are $10 on a $1000 limit, $15 on a $2000 limit and $20 on a $3000 limit.

NAB’s minimum repayments are higher: $35 a month if the credit limit is $1000; $75 a month if the credit limit is $2000; and $110 a month if the credit limit is $3000.

Finder said: “The downside with no-interest credit cards is the monthly fee. If you make all your payments on time with Afterpay, it doesn’t cost anything. Even if you pay off your balance every month with a no-interest card, you’ll still have to pay the monthly fee because you used the card.

“If you’re disciplined about your payments, a card with no annual fee will generally be a cheaper alternative.”

Canstar came to the same conclusion when it ran the numbers on NAB’s card. A card balance of $1000 paid off over a year would cost $120 in monthly fees. The effective rate is 21.5 per cent.

As an alternative, a no annual fee credit card with a $1000 balance and a 15.4 per cent interest rate (around the average in that segment) would cost $86 in interest if paid off over a year.

Canstar said the NAB card is more cost-effective than the average zero annual fee credit card on a $3000 balance, working out $17 cheaper over the year.