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As attention turns from rewards credit cards to low rate credit cards, we compare features and costs across all bank offers

As attention turns from rewards credit cards to low rate credit cards, we compare features and costs across all bank offers

Competition among banks and non-banks for credit card business is getting more active.

This latest flurry started when Air New Zealand shook up its relationship with BNZ. This brought a number of substantial changes in the 'rewards' sector of the market.

But this is a sector under pressure, especially as card users are better understanding that the level of spending required makes most reward schemes very hard to justify. The 'rewards industry' is making lots of money, but users are not seeing any benefits for all the spending required to claim the advertised advantages.

And this sector is fracturing as more non-banks are joining the fray. We know of yet another one that will be entering the market in a few weeks.

This is seeing many card users focus on fees and card costs, bringing new attention to the low rate card sector.

ASB launched its Visa Light card last week, featuring a zero annual fee. We covered that here.

You can find our full credit card rate tables here.

Today's (Monday) launch by The Co-operative Bank of its Fair Rate card makes this a good time to do a close comparison of the costs of the various low rate cards on offer today.

Bank Card Interest free
days (max)
fee $
Bal Tsfr
rate %
Bal Tsfr
Cash Adv
Low rate Mastercard 55 58*** 1.99 12 mths 22.95 13.90
Visa Light 55 0 0.00 6 mths 22.95 13.50*
BankDirect Low interest Visa 55 60 na n.a. 13.60 13.60
BNZ Low rate Mastercard 55 60 0.00 12 mths 22.95 13.45**
Co-operative Bank Fair Rate Mastercard 55 20 4.95 12 mths 12.95 12.95
Kiwibank Low Rate Mastercard 55 50*** 1.99 6 mths 19.95 13.45
Westpac Low interest Mastercard 55 65 5.95 till paid 22.95 13.45
      * Zero for 6 months for purchases of $1,000+
      ** Zero for first 6 months
      *** Zero for first year

The new Co-operative Bank "Fair Rate" card also has some other advantages over all other bank offers that are worth noting.

Firstly, by having the same interest rate for cash advances and regular purchases, you won't get the surprise you do with other cards. That is where the bank credits your repayments first to the lowest interest rate components (including any balance-transfer rate), leaving the highest components still incurring interest. Most users do not know of this treatment, and it bites especially hard if you use a credit card to make an ATM cash advance.

And secondly, the new Co-op Bank card won't approve an over-limit transaction, and therefore won't be charging over-limit card fees. These are $15/month at most other banks and apply as soon as you go over-limit. (Update: The Co-operative Bank have advised that they may approve some transactions if the breach is "marginal" - but there will be no approval fee for doing this. The rest of the credit card account needs to be "in order" for this to happen however.)

People with credit cards who just make minimum payments should check out our credit card calculator here. You might be appalled at the huge financial costs of only making minimum payments.

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22% interest is crazy when the OCR is 2%

The only crazy thing is using a credit card. You are essentially applying for free money "Credit" that you would not otherwise have access too, so this allows the creditor to set the interest rate. The OCR doesn't even come into it. What does? The gullibility or desperation of the borrower. No one is forced to use credit cards. Finance companies have high interest rates, p2p lenders also, and ofcourse banks. Look at the rates for personal loans fr example if you don't have a mortgage with that bank.
The consumer does have power around this issue. It's called willpower

There are plenty of people who are financially illiterate, operate their finance on a payments basis (disregarding interest rates) and those that have no savings that use credit cards in an emergency. They end up carrying a balance and it generates credit card brands/companies a lot of money each month.

Financial discipline/willpower does not exist for a lot of people and shiny platinum/gold cards are more important.

True, but that's where education must be gained via ones own initiative or you get played like a mug. Personal responsibility. One thing they don't teach at school is real financial literacy

OCR has nothing to do with this Interest Rate

Interesting thoughts about the rewards sector David. Really these schemes are becoming a plague, with no discernible benefit. And they sure complicate your life at the checkout. I really don't know why the companies keep trying to inflict poor ones us. It messes with their brand in my view.
As for the interest rates. Congenitally I have an aversion to paying credit card interest and never have. So in a strange way, the interest rate does not matter.

that figure from the last article about how many people pay interest on CC's is appalling, I would've thought most people paid the balance each month. But I guess it fits with our spend-more-than-you-earn country, government and citizens alike. As far as the co-op bank's card, the difference is only $20 annually with my current card, and I easily gain more than $20 in loyalty rewards in a year just with normal household spending. So what's the gain?

midgetkiwi. It's the dumb Kiwi consumer who is the problem for accepting this. Their acceptance makes the credit card fiasco possible. You can't blame the corporates for everything.

If the majority paid off their credit card balances each month, the banks wouldn't offer them.