Major bank rolls out ‘no-interest’ credit card for SMEs

The CommBank Neo Business card provides small-business customers with between $1,000-$3,000 of credit, with no interest payments, no late payments and no foreign currency fees.

Instead, the bank will charge customers a fixed monthly fee of $12 for a $1,000 limit, $18 for a $2,000 limit or $22 for a $3,000 limit.

Customers will be refunded their monthly fee if they have no purchases in a month and the card balance is zero at the end of their statement period.

No cash advances or balance transfers are available with the card. However, eligible CBA credit and debit Mastercard customers will be able to access cashback offers from Australian retail partners through CommBank Rewards when using the CommBank Neo Business.

The bank said that the card will help provide “financial certainty” to businesses.

Claire Roberts, CBA’s executive group manager of small business banking, said: “A dedicated business credit card with no interest, no late fees and no foreign currency fees, ticks the boxes for small businesses who want more flexibility with short-term cash flow to make purchases for their operations.

“Further, the fixed monthly fee provides small-business owners with some level of financial certainty, which will help with their budgeting,” Ms Roberts said.

“The CommBank Neo Business card also makes managing the books easy, with the ability to automatically share spend data with accounting software,” she added.

The small business banking executive group manager said that the payment card would help support the growing number of business customers in their entrepreneurial endeavours. According to CBA, the number of new CBA Business Transaction Accounts rose 36 per cent over the past six months, with Millennials (born between 1981 - 1996) driving the majority (57 per cent) of the growth. CBA also suggested that the proportion of Millennials running a “side hustle” had increased by 40 per cent over the past year.

The end of the traditional credit card?

The move to launch no-interest credit cards comes as younger Australians move away from credit cards amid a perceived opacity of the products’ fees and charges, and the belief that they are too expensive.

Both CBA and NAB last year announced the “no-interest” credit cards in response to competition from buy now, pay later (BNPL) services, which are seeing increased take-up among customers, particularly younger adults.

According to data released by the Reserve Bank of Australia, the value of new payments platform transactions rose by 192.4 per cent over the 12 months to July 2020.

However, the value of credit card retail payments over the same period dropped by 14.3 per cent.

Moreover, recent data from Equifax shows that there was a 28.9 per cent drop in credit card applications in the March 2021 quarter (when compared with March 2020).

Indeed, the company revealed that the drop equated to the 12th consecutive quarter in which credit card applications declined (or every quarter for the past four years), and the seventh consecutive quarter in which personal loan applications had fallen (or every quarter in the past 2.3 years). 

However, while credit cards and personal loan demand remains soft, BNPL applications continue to grow. 

The Equifax index found that there was a 4.0 per cent rise in BNPL applications in the March 2021 quarter when compared with the same three months last year.

[Related: Two-fifths of COVID-19 AFCA complaints about credit]