Westpac out to go lowest

WESTPAC is working on a plan for a new basic credit card with an interest rate of under 10 per cent — a first for a major Australian bank.

The move confirms a muchneeded price war has broken out in the $50 billion Australian credit-card market, following ANZ’s opening salvo in which it slashed rates by as much as two per cent.

Westpac’s new card — which is still under development — is not only breaking new ground on interest charges, it will have an embedded instalment plan never before seen in Australia that will allow a user to buy a fridge or pay off part of the balance at an even lower rate.

The nation’s second-largest lender believes hundreds of thousands of working families will be attracted to the new card, which is unlikely to have fees for late or dishonoured payments or being overdrawn. Rather, it is expected to have an all-inclusive annual fee of a little more than $100. It’s anticipated the maximum credit limit will be a relatively low $4000. The card will not offer free travel insurance or the ability to transfer a balance from another card.

Critics said Westpac’s move, while welcome, was a ploy to pacify politicians who will resume publicly grilling the Big Four later this week.

Westpac has been working on “Project Lite” for four months and it will be several more before the new basic card hits the market. In that time, the bank will finalise details such as the length of the interest-free period, but it is likely to be between 40 and 55 days.

What is set in stone is that the interest rate will be no more than 9.99 per cent, said Westpac consumer banking boss George Frazis. That will be the first time an Australian bank of any size has offered a single-digit percentage rate credit card.

“I think this is a huge breakthrough for us and the market,” Mr Frazis told the Sunday Territorian. “This might be close to a global first.

“Hundreds of thousands of customers will go after this card, that’s for sure. It’s a compelling offering,” he said.

“We are helping working families to manage their weekly and monthly cashflow in a responsible way.”

Choice spokesman Tom Godfrey said Westpac’s move was a “positive step” but one designed to “take the heat off themselves ahead of their appearance at the parliamentary inquiry this week, after more than a decade of ripping people off”.

The Big Four — ANZ, CBA, NAB and Westpac — will be reappearing before the House of Representatives economics committee after initial publication examinations in October last year.

“This might be close to a global first” GEORGE FRAZIS