Ahh, St George. You were on such a roll. We loved the
Vertigo MasterCard and especially loved the
Platinum. Then you went a ruined it all by doing something stupid like the No Annual Fee card.
Admittedly, St George aren't the only bank to try this on. Most of the major banks offer a 'no annual fee' option under the guise of 'giving our customers options'.
The problem is that banks mitigate the loss of the annual fee by adjusting the purchase rate up. Way up. In the case of the St George No Annual Fee, the interest rate (on purchases and cash) is 18.75%, 7.76% higher than the Vertigo which has an annual fee of $55. Let's do some quick sums:
Let's say you have a balance of $2,000 on your credit card that you roll over each month. Over the year, you'll pay about $150 more in interest on the No Annual Fee than you would on the Vertigo. Makes that $55 annual fee look pretty good, huh?
Of course, the difference is much lower if you have a smaller balance and if you're reducing that balance over time, but even if the balance is only $1,000 (much lower than the reserve bank's estimate of the average consumer credit card debt), you'll still pay $76 more.
It's hard to say what drives this strategy. Perhaps the banks get nervous about the risk. With a card that has an annual fee, the bank will always receive at least that amount from the customer, even if they never accumulate interest or other fees. They don't have the same security with a no annual fee card, so they over-compensate the interest to ensure they don't provide the card at a loss.
Whatever the reason, a $0 annual fee seems to significantly reduce the value of the card and the St George No Annual Fee does nothing else to sweeten the deal. There is no interest free period. No rewards program. No travel insurance. No balance transfer.
You do get access to St George Instant Benefits (shopping coupons and special offers) and up to three free additional cards. Also, the cash rate is 18.75% which is slightly lower than most cards, but we're really scraping the barrel when we need to mention that.
Overall, this card is really only suitable for those who don't want to pay an upfront annual fee, but it's false economy - you'll end up paying much more in interest.
