Aussie banks are wising up to new spending habits by offering no-interest credit cards. But do they stack up against BNPL offerings?
The extortionate interest rates still being charged on most credit cards is outrageous. Australians are onto this rort and credit card usage and outstanding balances are plummeting.
Another factor has been younger consumers using Buy Now, Pay Later (BNPL) as an alternative to credit cards. It seems the message is getting through to banks, which have now started to issue zero per cent interest credit cards.
Like CBA and NAB, Westpac is offering no-interest to pay, no currency conversion fees and no late fees. However, Westpac has put more rigorous checks and balances on this new card, with a credit limit of just $1,000 and higher minimum repayments that force customers to clear their debt faster.
No interest credit cards vs BNPL
So what are the key differences between these 0% credit cards and BNPL like Afterpay?
- Credit cards can be used almost everywhere, but Afterpay can only be used at affiliated stores.
- Credit card providers MUST do credit checks – Afterpay doesn’t.
- Afterpay charges late payment fees; 0% interest credit cards don’t, instead charging monthly fees.
- Afterpay forces customers to pay off the debt within 6-8 weeks, whereas the credit card from Westpac has a $40 a month minimum repayment.
Watch out for monthly fees
These zero per cent credit cards all come with fees of between $10-$22 a month. If you don’t use the card that month, or have money owing, you won’t be charged. So try to pay it off when you’re not using it so you don’t get stung.
Westpac has a slightly different model where customers who pay the balance owing by the due date at the end of the month will avoid the $10 monthly fee. So essentially it will reward customers who pay off their debt each month.
But of course, the most important message, whether it’s BNPL or a no-interest credit card, is don’t buy things you can’t afford to pay back.
Set yourself strict spending limits and limit yourself to one platform or credit card only.
Quick tips to avoid getting into trouble using no-interest credit cards or BNPL
- Read the terms and conditions and understand which fees you could get hit with.
- Set yourself strict spending limits.
- Limit yourself to one platform and one purchase at a time.
- Don’t impulse buy. Sit on any major purchases for at least 24 hours, preferably 72 hours.
- If you get into trouble, pull the pin and call for help. Each platform should have a hardship policy to help you get out of trouble, or call the National Debt Helpline for advice.