Credit card rate to set new low

By FIONA ROTHERHAM

ASB's Bank Direct is about to launch a new credit card with a standard interest rate it says will significantly undercut the market.

The average standard rate is 18.6 per cent. Other bank credit cards offer tiered rates as low as 12 per cent for big purchases or based on the account balance.

Yesterday American Express launched a blue credit card offering the lowest standard interest rate so far in New Zealand - 16.99 per cent. The rate drops to 9.99 per cent as a six-month introductory offer for customers transferring the balance on their existing cards.

Bank Direct general manager James Mitchell said the rate for the new card had yet to be finalised, but it would be close to the Amex introductory offer and undercut tiered rates.

While the interest rate would be aggressive, rising funding costs might prevent the online bank offering a single-digit interest rate, he said.

The lower rate will be offset by a higher annual fee for the card.

Mr Mitchell said the product was aimed at those with significant levels of debt, providing an alternative to Bank Direct's existing Visa card.

Switching would be cost-effective only for those with $600 or more on their card for 12 months, he said. Someone with a $600 balance paying the American Express rate instead of the average rate would save only around $3 a year, not enough to offset the higher-than-average annual fee of $35.