Low interest rate cards typically charge an annual fee of between $40 and $60 although fees for standard credit cards (which charge higher interest rates) can be as low as $20 to $30.
Bruce McLachlan, chief executive of Co-op Bank said the average Kiwi spent around $12,000 a year on their credit card which meant roughly half of users were getting less from their loyalty programmes than they were paying in fees.
"Instead of focusing on rewards people should be looking at fees," he said.
Credit card use in New Zealand
•2.5 million cards on issue in New Zealand
•Around $6 billion owed on credit cards
•Interest is paid on more than 60 per cent of credit card debt
•average interest rate paid on money owed was 18 per cent in August
The Co-op card will also have the same interest rate for cash advances and won't charge a fee for people who go over their credit card limit.
McLachlan said many people got caught out by the cash advance interest rate on low interest rate cards.
While low interest rate cards can have a purchase rate of 13.45 per cent if a cash advance is made the rate can be much higher at 19.95 per cent or 22.95 per cent.
Then when a person goes to pay off their credit card the money gets put towards paying off the lower-interest purchases first.
Reserve Bank figures show the average interest rate paid on outstanding credit card balances for August was 18 per cent on the $6.46 billion Kiwis owed.
McLachlan said many Kiwis said they paid off their credit card balances in full each month but figures suggested otherwise.
In August $3.85b of the $6.05b advanced was outstanding and incurring interest meaning 64 per cent of the money owed was not paid back to the lender.
"People say they are - but they are not. Then they say they are getting points to justify it."
But he said in many cases the annual fee was more than the benefits people were getting from their loyalty rewards.
"Loyalty is the wrong conversation to have - unless you are a big spender."
The card has been timed to launch just ahead of the Christmas spending period when Kiwis give their cards the biggest work-out.
Five credit card myths
•the interest rate doesn't matter because I will pay it off in full every month
People pay interest on around two-thirds of credit card debt
•The points I get make it worth it - If you spend less than $12,000 a year on your credit card you could be paying more in fees than you earn in points.
•I've got a low interest rate credit card so even if I pay interest it's not that high
If you use your credit card for getting cash out or transferring cash to your other accounts you are likely to be paying a much higher interest rate than the low-interest rate.
•When I pay off my card the money goes on the high interest bearing debt first. in most cases it doesn't.
*I only use my card for emergencies. Really, and what constitutes an emergency?
