That included consumers seeking better control and certainty around borrowing products.
Like NAB’s offering, CBA’s card will charge people a monthly fee, based on their borrowing limit, each time money is borrowed. That fee keeps ticking over while money is outstanding or when the card is used again; no fees are charged if the card is not used.
CBA’s card charges $12 a month for a $1000 credit limit, $18 for a $2000 limit and $22 for a $3000 limit. It would be used in conjunction with store reward campaigns, such as people spending $100 at electronics retailer JB Hi-Fi getting back $12, offsetting the monthly fee cost, Mr Sullivan said.
Mr Sullivan said if a borrower used a $3000 limit Neo card at the maximum over a year, the equivalent rate would be 8.8 per cent. “If you use less of the card, the rate becomes slightly more expensive,” he said.
The launch of NAB’s new card won support from consumer group Choice as a “step in the right direction”.
“For too long, banks have profited from the complexity of credit cards,” Choice’s Patrick Veyret said. That included a mix of annual fees, different interest rates for purchases and cash advances and interest-free periods.
“While this product won’t be right for everyone, it’s a lot simpler to understand than most credit cards,” he said.
It would also be subject to responsible lending laws, he said, unlike buy now, pay later products.
CBA’s Mr Sullivan said the target market for the new card was “definitely skewed younger at the moment”, he said. Yet the product could prove attractive to people travelling, he argued.
Not every entity is straining to enter the BNPL sector at the moment. Paul Lewis, chief executive of customer-owned lender CUA, said his institution was just watching the sector.
New contact centre
“It’s certainly not the focus of our investments. Our investments are very focused on our platforms,” he said, citing examples such as a new contact centre that went live two weeks before initial coronavirus shutdowns hit Australia.
Despite all the promotions around new ways to borrow, some things with CBA’s new card remain the same.
“It’s very similar to nearly every other obligation a person makes when they owe someone money,” Mr Sullivan said. “That’s true in the buy now, pay later segment as well, right? If you eventually get to the place where you’re not paying the money back … there’s collections involved.
“Obviously customers are expected to make those payments back.”