the mozo blog

Whoever said there’s no such thing as a free lunch was kidding themselves. Banks are literally throwing money at customers to try and get them through the doors.

Take for instance the ING Direct Orange Everyday account: it costs nothing to get it and you can and will earn $60 for free by simply depositing money into the account, making a purchase with your Visa Debit card, and debiting money from your account ($20 each). On top of this, every time you withdraw $200 or more from an ATM, ING Direct will pay you $0.50.

Perhaps you’re the kind of person that likes credit cards rather than debit cards? Not a problem! Sign up for the HSBC Credit Card and you’ll be credited with $50 when you make your first purchase. Or the Woolworths Everyday Money Card, which gives you a $50 shopping card after you make 3 purchases. If you’re smart about these types of deals then you could be making yourself a tidy little sum for about half an hour’s work of filling in application forms. The banks are obviously hoping you will stay with them, but if you wanted you could simply then pocket the money, pay off the purchases and then cancel the card. However be careful doing this, because if you make lots of applications for credit this will show up on your credit history – and that may make it harder to get credit in the future!

Perhaps a better way of getting something for nothing from a credit card is via rewards points on a card that has no annual fee. If you always pay off your card in full, of course! There’s not many cards out there like this, but they include the American Express Gold Ascent Rewards Card, American Express Blue Sky Credit Card, the Bank of Queensland Blue Visa and the Coles Group Source Mastercard. There are also a few rewards cards that waive the annual fee if you spend more than a certain amount each year, including the Amex cards offered by AMP, HSBC and Suncorp.

If you’re the kind of person that can walk past a $50 note lying in the street then this blog isn’t for you. If not then enjoy your free lunch. I know I did.

(Note: the offers mentioned in the article were valid at the time of writing, but they may not be by the time you read it. And of course, there may be terms and conditions on each offer that we’ve not reproduced here.)

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Being totally independent and objective, Mozo doesn’t always have nice things to say about the ‘Big Four’ banks — especially because they often pawn off their better products to subsidiaries (Commonwealth to BankWest, NAB to UBank, to name a couple). So I decided last night to start digging around and find something competitive being pushed into the marketplace by one of these big players. A few fun-filled hours ensued as I trawled their respective websites, with unnecessary fees and uncompetitive rates as far as the eye could see. Swilling the dregs of my third coffee, I resigned myself to defeat and decided to humbly retreat to the comforts of Celebrity Masterchef. I’ll just have one last quick poke around, I said to myself, then go check how many cravats Matt Preston’s wearing.

And then I stumbled on the NAB Low Rate Visa Card — hold the celebrity cook-off!

First of all, the card has a very low rate on purchases: 10.99%, one of the best on the market. A relatively low annual fee of $49, and 55 days interest fees are other nice, if not inspiring benefits. The real thing that makes this card a winner is the promotional offer: 0% on purchases and balance transfers for the first 6 months.  With Christmas looming, this card could be a real winner for those hoping to spread the festive load over half a year without having to pay any extra interest.

Plus there’s a big saving on interest payments if you transfer a balance from another card — 0% for 6 months. The one stumbling block here is what happens after these 6 months. The purchase rate reverts to 10.99%, so that’s fine. However, balance transfers revert to the cash advance rate, which is set at a not so competitive rate of 19.99%. And in another sneaky twist, you’ll have to pay off that low-interest purchases debt before you can put a dent in the higher-interest balance transfer.

This card will save you a bunch — but ONLY if you can pay everything off in 6 months.

So NAB has proved the Big 4 can actually put out a quality product that’s economical to boot. If you can pay off that balance transfer in time, this could be the card that will feather your present nest without breaking the bank. Just make sure they’re not all cravats.

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Last month Jetstar rather unexpectedly unveiled its new line of credit card, the Jetstar Mastercard. We’ve seen this before when Virgin – amid a blitz of fanfare and publicity – launched their card back in 2003. Jetstar, as we all know, run their airline on the low-cost carrier model and as such, they’ve decided to try to extend this image of affordability and price-competitiveness to their credit cards. An interest rate of 10.99% on purchases certainly does that, placing it solidly among similar cards, while the offer of 0% on balance transfers for 6 months is an attractive option for those looking to switch over — the bonus being that it reverts back to the low purchase rate rather than the significantly higher 19.99% cash advance rate of most other credit cards. The annual fee of $49 is at the lower-end too.

But here’s the thing: as far as placing itself in the ‘low rate credit card’ market goes, this card really is nothing spectacular in terms of pricing. There are cards out there with better combinations of rates and fees, such as the BankWest Lite Mastercard or even the NAB Low Rate Visa. The only real point of difference, and what we assume Jetstar is hoping will sell this product, is the ‘Jetstar Dollars’ rewards program. The addition of this program makes the Jetstar card the lowest rate credit card that offers rewards.

It makes a snappy little media soundbite, but are these rewards any good? Well, here’s how it works. You accrue ‘Jetstar dollars’ at a rate of 1 cent for every real dollar spent. As soon as you accrue $100 dollars they automatically send you a travel voucher to be used on any Jetstar flight (or if you prefer, you can request it early in increments of $25). From here on in, unlike any other flight rewards program, Jetstar really do put a gun to your head. You have to book using that voucher within 3 months, and travel within 6. You can’t accrue enough dollars to buy a flight to Hawaii or Bangkok or any other exotic destination; you’re effectively limited to $100 off your trip — or a summer holiday in Adelaide. Just what you always wanted.

They go on to boast in their press release that you can save up to $500 dollars annually on Jetstar fights. But for this to happen, you have to spend $50,000 on your card (anything over this doesn’t earn Jetstar dollars), in which case you’ll get 5 separate vouchers to be used up within those narrow timeframes. Perhaps when Qantas points become an option (mooted for mid-2010 release), we’ll take a bit more interest.

So all up, look, maybe we’re being a bit harsh on the Jetstar card. As a package it’s relatively competitive. However, when you’re making the leap from airline to credit card, they should’ve taken a leaf out of the Virgin book. When Virgin launched their credit card, it was revolutionary for the time -  no annual fee, instant rewards, a very low rate and small things like colour choices and real people on the phone. Sorry to clip your wings Jetstar, but your card is nothing special.

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The recent rise in popularity of debit cards may have some people thinking their credit card is yesterday’s plastic. Driven by the surge in internet transactions, debit cards are a league ahead of their ATM/EFTPOS predecessors, offering the benefits of greater acceptance without the risk of greater spending.

While debit cards are not new (most banks and credit unions have been offering them for years), MasterCard and Visa have recently increased their presence here to compete with EFTPOS. Since it was introduced, EFTPOS has had little competition in Australia, but the boffins at EFTPOS haven’t kept up with the times, and more specifically, the internet, opening the door for the debit card.

It seems the newly refurbished Visa and MasterCard debit cards will soon usurp the throne of EFTPOS to become the new norm. However, debit still faces the competition of the credit card. So who will reign supreme?

Credit Cards:

Pros:

• You have access to money that isn’t yours for impulse purchases before your pay day
• Rewards programs
• Travel insurance (on some cards)
• Accepted almost everywhere as a form of payment

Cons:

• You have access to money that isn’t yours for impulse purchases before your pay day
• Annual, late payment, rewards program and dishonour fees
• Interest payments on outstanding balances
• Cash withdrawals (or ‘cash advances’) incur hefty fees and interest rates

Debit Cards

Pros:

• You’re using your own money so you never have to worry about interest payments
• Accepted almost everywhere as a form of payment (including overseas ATMs)
• You can use it to withdraw money from an ATM or get cash out with purchases

Cons:

• There are fees associated with some debit cards.
• There are no rewards programs
• You could be tempted to spend more money over the internet simply because you now have the access

The verdict:
Credit cards are great if you want rewards more than you mind annual fees, and will pay off your balance before the interest rate kicks in. If this isn’t you, then debit cards are the way to go. Happy spending people!

Compare credit cards at mozo.com.au

Compare debit cards at mozo.com.au