In what has been described as a “groundbreaking” move for the Australian market, a non-major bank has launched a credit card whose interest rate is tied to the official rate set by the Reserve Bank.
Following off the back of its RBA Rate Tracker Home Loan, Auswide Bank has now released a Low Rate Visa credit card that comes with a floor rate of 7.95 per cent per annum, plus the percentage of the official cash rate.
That will mean customer’s interest rate would only change if the Reserve Bank moves the cash rate.
Given that the cash rate has been held at its record low level of 1.50 per cent for the past two years, this would mean that customers would be charged an annual interest rate of 9.45 per cent.
However, Reserve Bank governor Philip Lowe has said recently that the next movement in the cash rate would be an increase, should the economy strengthen and income growth and inflation lift.
Auswide Bank added that should the cash rate ever reach zero per cent or below, the credit card floor rate of 7.95 per cent would apply.
The agreed rate would apply to both purchases and cash advances.
The card also comes with an annual fee of $50 per year, which is waived for those under the age of 25.
According to the bank, the “unheard of” rate tracker feature would provide customers with “certainty”, as they would know when (if at all) their rate would change.
“In a crowded credit card environment, it was very important for us to consider how our card would compare and rate against others in the market place,” said Auswide Bank chief customer officer Damian Hearne.
“We think our Low Rate Visa credit card is superior in rate and also offers certainty to customers across Australia who are looking to manage their finances more affordably.”
Mr Hearne added that given the launch of the bank’s rate tracker home loan, it believed that “with a similar feature for credit cards, that this will prove highly popular”.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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