NAB StraightUp: How credit cards are changing in a buy now pay later world
As more people turn to Afterpay and other services, NAB is one of the credit card providers making changes.
The NAB StraightUp card highlights one of the biggest differences between credit cards and Afterpay: interest rates. Instead of charging interest on your balance, this card has a monthly fee between $10 and $20 based on your credit limit.
This monthly fee is included in the minimum monthly payment, which is up to $110 if you get the maximum credit limit of $3,000.
But unlike buy now, pay later (BNPL) plans, you don't have to pay the same amount each time – and you don't have a fixed deadline when you need to pay it all off. So, if you bought something for the maximum of $3,000, you could pay it off over 8 weeks, 8 months or even longer if you wanted.
While NAB was the first provider to launch this type of card, CommBank quickly followed with the announcement of a new "no interest" credit card. While the CommBank Neo isn't available for applications yet, it shows these "no interest monthly fee" credit cards are a strong, new option on the market.
How other credit card providers are adapting
These new cards from NAB and CommBank are the latest example of changes to how you can use and pay off a credit card.
In July 2020, American Express launched an instalment plan option for cardholders – Plan It. This is a feature anyone with a personal American Express card can use to pay off a balance of $150 or more over 3, 6 or 12 months.
Similar to the NAB StraightUp card, with Plan It you pay a fixed monthly fee instead of interest charges and the fee is factored into your monthly repayments. But unlike the NAB card – and more like BNPL services – your payments are the same amount each month (e.g. $300 a month).
The American Express Plan It feature follows on from other credit card providers that offer instalment plans, including CommBank, Westpac, Citi and Skye.
The details of these plans may vary but what they all show is a different way to use credit cards that's closer to BNPL in structure. Plus, you're not as limited with where you can use a credit card compared to BNPL plans that rely on businesses paying to offer the service (as Afterpay does).
How to choose between these options
With both credit cards and BNPL, checking the costs are key to choosing which option works for you.
A good place to start is with repayments: How much do you need to pay each time? Are payments fortnightly, monthly or a time period of your choosing?
If you made a $3,000 purchase with Afterpay, you'd pay $750 a fortnight for 4 fortnights. If you made a $3,000 purchase with the NAB StraightUp card, you would need to pay at least $110 each month.
At that rate, it would take just over 27 months to pay off the debt and cost around $818 in monthly fees. But you also have the option to pay more than $110 per month, or even make payments more regularly – meaning there is more wiggle room if you need it.
The other costs to look at include:
- Establishment fees. Some BNPL plans and some credit card instalment plans charge a fee when you set up an account. For example, the Westpac SmartPlan credit card instalment plans have establishment fees of between 1% and 4% of the purchase value (depending on the instalment plan you choose).
- Monthly fees. For example, the NAB StraightUp has a monthly fee of $10, $15 or $20 based on your credit limit, American Express Plan It plans have a monthly fee that's offered to you before you commit to the plan and Humm charges a monthly fee of $8.
- Reduced or promotional interest rates. Some credit card instalment plans offer a lower interest rate compared to what you'd normally pay. Think about how this will add up over the term of your repayments to decide if it's worth it.
- Late payment fees. For example, Afterpay has an initial late payment fee of $10, with a further $7 if you still haven't paid the next week and Skye Mastercard has a $35 late payment fee.
- Minimum plan amounts. Most credit card instalment plans have a minimum amount you can put on a plan, such as $150 for American Express Plan It and $250 for a SkyePlan.
For credit cards, it's also worth looking at the annual fee cost and the impact other interest charges could have if you make more purchases.
Bottom line? Think about what's going to be affordable and practical for you.
If you can afford to pay off what you buy in the short-term, then Afterpay gives you an interest-free way to do it without in-built fees. If you want more time, or a back-up for emergencies, then an account like the NAB StraightUp or a credit card with instalment plans gives you more options.
Whatever you decide, one thing is for sure: having so many choices means more competition – and better deals for you.
We updated this story on 11 September with details of CommBank's Neo card.
Want to look at more options? Read our review of the NAB StraightUp credit card, learn more about different BNPL options and compare credit cards with instalment plans. If you already have a credit card debt, you can also use Finder's repayment calculator to work out how much you need to pay to get rid of it.
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