An Australian first: NAB launches zero-interest credit card

In recent years, many Australian consumers have turned to buy now, pay later services in order to make larger purchases and delay payment, but now National Australia Bank has launched a new interest-free credit card in a bid to take on services such as AfterPay, zipPay and Openpay.

The banks’ new StraightUp credit card is Australia’s first-ever zero-interest offering and provides NAB customers with up to $3,000 of interest-free credit, along with no late or foreign currency fees, for a one-off monthly payment of between $10 and $20. However, if the card is not used, there will be no monthly fee to pay.

The zero-interest rate compares to an average rate of 16.78 per cent with other credit cards, however the credit limit of $3,000 is much lower than the average limit of $10,000.

RateCity research director Sally Tindall said the card would appeal to consumers who want credit, but are worried about falling into unmanageable debt.

“With a maximum credit limit of $3,000 and a minimum repayment schedule that forces customers to pay down their debt faster, this new credit card is a step in the right direction,” she said in a statement today. “The StraightUp card comes pre-wrapped in cotton wool. Customers will still get hit with fees if they don’t clear their debt, but the damage that can be done is limited.

“The low credit limit won’t appeal to seasoned credit card users, but it’s likely to attract younger Australians looking to try out a credit card for the first time,” she said.

However there are some downsides to the card, as consumers will not receive any rewards points, perks or signup bonuses. The card may also not be suitable for regular spenders who clear their debt or those who spent large amounts as the credit limit is capped at $3,000, while the monthly fee is quite high if you have a balance owing.

Meanwhile Choice hailed the credit card as a “step in the right direction”, as the consumer group’s banking policy expert Patrick Veyret stressed the need for reform within the credit card market.

“For too long, banks have profited from the complexity of credit cards,” Veyret said. “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.”