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CBA announces zero interest credit card CommBank Neo: How does it compare?

Posted: 10 September 2020 9:01 pm
News

Commbabk branch

The Big Four Bank's new offering comes less than a day after NAB released its own new no-interest card.

CommBank today announced plans to release a new credit card that scraps conventional interest payments in exchange for a flat monthly fee.

The new card, named CommBank Neo, also charges no late fees and no foreign exchange fees. If the balance on the card is zero, customers are refunded their monthly fee.

CommBank's announcement comes hot on the heels of NAB's interest-free Straightup Card released earlier today, which similarly charges a flat monthly fee depending on the credit limit chosen.

These new launches from the Big Four banks comes comes amid growing competition from buy now pay later providers such as Afterpay and Zip Co, which also offer zero interest credit and have attracted younger buyers with easier application processes.

How does CommBank Neo work?

Customers can spend up to $3,000 using CommBank Neo, but the monthly fee is based on your approved credit limit.

For a limit of up to $1,000, there's a $12 per month fee, which increases to $18 for a limit of $2,000 and up to $22 for a $3,000 limit. However, this fee is refunded if there's no balance remaining on the account and if the card hasn't been used that month. (The fees on NAB's competing card are at similar levels.)

As well as the monthly fee, customers must make a repayment of 2% of the closing balance or $25 each month, whichever is greater. While that means the card is technically "interest-free", if you don't pay off the balance in full you could still spend a large amount in fees on your purchases.

For instance, if you spent $100 on the card but only made the minimum repayments, you'd have to pay $25 a month for 4 months, and pay $48 in fees as well. The key, as with any credit card, is to aim not to spend more than you can pay off in full each month.

CommBank said the card did not offer cash advances and could not be used for "gambling" purposes. The other card features include:

      • No late fees
      • No foreign exchange fees
      • Cash back rewards from 80+ retailers
      • No monthly fee if the card hasn't been used and there's no remaining balance

CBA's group executive of retail banking services Angus Sullivan said the new card would benefit customers by offering a range of discounts and CommBank Rewards offers.

"We are really excited to launch our simple, easy to understand product which we believe offers great value to our customers," Sullivan said in a statement announcing the card.

CommBank Neo is expected to be officially launched by late 2020.

How does it compare?

CommBank Neo has a similar set of features to NAB's interest-free StraightUp card.

Like CommBank Neo, StraightUp charges no interest, no foreign exchange fees and no late fees. Both cards also offer credit limits in options of $1,000, $2,000 and $3,000 along with a tiered monthly fee.

There are however a few differences when it comes to the monthly fees and the repayment structure.

Fee for $1000 limitFee for $2000Fee for $3000
CommBank Neo$12$18$22
StraightUp$10$15$20

StraightUp offers slightly lower monthly fees across the range starting at $10 for the $1,000 credit limit option, compared to CommBank Neo’s $12 fee. At the $3,000 limit, CommBank Neo charges $22, compared to StraightUp's $20 fee.

And while CommBank Neo requires customers to make a minimum repayment of $25 or 2% (whichever is higher), StraightUp has a tiered repayment plan based on the set limit.

StraightUp customers must repay at least $35 a month for a $1,000 limit, $75 for a $2,000 limit and $110 minimum for a $3000 limit. The monthly fee is included in the balance.

Looking for a low-cost credit card? Check out $0 annual fee cards and cards with 0% purchase rates.

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