Credit cards: A year in review, and what’s changed?

In between investing in reusable masks and learning to ‘check in’, a lot went down in the credit card world last year. 

Aside from being asked to exclusively try to use plastic to limit the spread of Covid-19, credit card providers were also left with the task of managing redundant travel rewards programs and assisting financially vulnerable customers. 

To give you an official recap, we’ve broken some of the credit card news highlights over the last year.

What did credit card spending look like in the last 12 months?

The short answer, an absolute rollercoaster. 

First, credit card spending plateaued. In fact, a study conducted by data analytics and consumer intelligence company J.D. Power found that 42% of credit card customers decreased their usage last year. 

Mozo also found that 25% of Aussies received a ‘financial wakeup call’ during the height of the Covid-19 pandemic and made the decision to get debt-free once and for all. 

However, as we headed into the festive season, spending picked up again before dropping in Jan and spiking again in Feb of 2021. We weren’t kidding when we said it was a rollercoaster.

Credit card rates, featured and fees: What changed?

It’s not often you see credit card providers slash purchase rates on products, but given the financial strain the pandemic placed on many Aussies, priorities changed. 

In April 2020, Mozo reported that five providers cut rates on their cards between 25 and 100 basis points. Other support measures that were introduced were deferring repayments, waiving late fees and interest or lowering the minimum repayment amount. 

Like we said, credit card rates rarely change, even with the numerous RBA rate cuts over the last eight years. That’s why we decided to do some digging on the matter. 

According to our number crunch, credit card providers have profited a whopping $6.4 billion by not passing on RBA rate cuts to customers. The one card issuer who did pass on the most recent cut was Auswide Bank, shaving 15 basis points off its Low Rate credit card.

What about rewards cards and bonus point deals?

With international travel a no-go zone until further notice, many Aussies began to see their rewards card in a different light. 

We found that 66% of Aussies say rewards cards aren’t worth the return anymore and that the value rewards credit cards had declined significantly. And they might not be wrong either, as the average rewards card’s net value has plummeted from $126 five years ago to a mere $34 in 2020. 

But that didn’t stop rewards card providers from dishing out a bundle of bonus point deals to entice new customers. There were also cashback deals from providers big and small, including Amex, NAB, Westpac and BankSA.

How about Buy Now Pay Later or interest-free options?

Over the last few years, Buy Now Pay Later (BNPL) companies have taken Aussies shoppers by storm, promising interest-free spending and flexible repayment options. To combat this, big banks CommBank and NAB threw down the gauntlet and launched their adaptation: an interest-free credit card. 

NAB made a move first, releasing its ‘Straight Up’ interest-free credit card in September 2020 and CommBank shortly followed by revealing its Neo interest-free credit card in December 2020. 

Both cards promise no late fees and interest-free spending, however, there is a monthly fee based on the customer’s credit limit. 

The result? It was a hit. 

CommBank figures from a month ago found that one-third of all credit card approvals in December was for the Neo interest-free credit card, with more than half of the card’s uptake coming from millennials alone. 

American Express also moved to keep up with BNPL companies with their version, ‘Plan It’. 

Like BNPL, Amex customers can now make purchases ($150 minimum spend) using their card at any American Express-accepting merchant and pay them off in interest-free instalments of either three, six, nine or twelve months. 

Phew, that was a lot! 

But just in case you’re still hungry for more, you can head on over to our credit card comparison tool to keep up with some of the latest credit card offers around.