Big four bank NAB has responded to the growing popularity of buy-now-pay-later services among millennials eschewing credit cards, by introducing a “no interest” credit card that instead charges a monthly fee.
The NAB StraightUp Card offers credit of up to $3000, and has a “no use, no pay” feature, meaning that if there’s a $0 balance during the statement period, you don’t have to pay the monthly fee.
There are no annual or late payment fees, and the cost ranges between $10 a month for a $1000 credit limit to $15 for $2000 and $20 for $3000.
That charge means the effective interest rate on using the card is between 11% and 13.5%, assuming the full credit limit is used. That cost is well below the swingeing 20% interest rates charged on many cards, despite record low interest rates, which have driven millennials away from bank credit cards.
The card does become expensive if not maxed out, since a user with a $3000 credit limit would still pay a $20 fee per month on an outstanding balance of $200.
Users are expected to pay a minimum monthly repayment of $35, including the monthly fee, on a $1000 balance, $75 on $2000 and $110 on $3000.
The upper credit limit goes well beyond Afterpay’s sweet spot for purchases of between $500 and $1500, with customers are expected to pay in instalments over 56 days.
Afterpay charges a $10 late payment and additional fees if users fail to meet the repayment deadlines. BNPL rival Zip, for example, changes a monthly account keeping fee of $5.
The StraightUp Card doesn’t allow cash advances and can’t be used for gambling transactions.
NAB Group Executive, Personal Banking, Rachel Slade said the NAB StraightUp Card was developed to meet changing customer demands, with the bank realising it needed to innovate
“Credit cards have not really evolved in recent years. But our customers’ needs and expectations are changing and we want to change with them,” she said.
“In the NAB StraightUp Card, we’ve created something completely different to every other credit card available today, with a simpler approach that makes it easy for customers to take control of their finances.”
The NAS offers a continuing line of credit, but unlike Afterpay, is subject to a rigorous application and credit check process. It can be used anywhere Visa is accepted and with contactless options such as Apple Pay, Google Pay, Samsung Pay and NAB Pay.
The NAB’s new product follows big for rival CBA investing heavily in Swedish BNPL Klarna, which launched in Australia earlier this year.
Applications for the StraightUp card open today.