Amex launches card with lower interest

By FIONA ROTHERHAM

American Express is aiming at the mass market with a new credit card that has a standard interest rate of 16.99 per cent - 1.5 per cent below the New Zealand average.

The "blue" card has two additional sweeteners: a six-month introductory interest rate of 9.99 per cent for those switching from other cards and a money-back bonus limited to $1100 a year based on annual spending.

The $35 annual fee is also waived for the first year.

American Express first launched credit cards in Britain in 1997. Last November existing New Zealand charge cardholders were offered a complementary credit card - either green or gold depending on income - at an even lower standard interest rate of 14.99 per cent.

These credit cards include the same rewards, such as air miles, as the charge cards. But on the new blue credit card the money-back bonus replaces them.

Unlike most other bank credit cards on the market, the American Express card does not include tiered rates which can go as low as 9 per cent to 10 per cent.

New Zealand credit card interest rates have been too high, according to American Express Australia/New Zealand head, Barry Arnold.

He says American Express can offer a lower standard rate without affecting shareholder viability or tightening conditions of usage because of lower overheads.

David Tripe, director of Massey University's Centre of Banking Studies, says local consumers are notoriously insensitive to credit card interest rates because they "don't seem to believe they are borrowing."

He believes the new card is unlikely to attract those who do not borrow significant amounts because credit cards such as Mastercard and Visa have wider merchant acceptance here and overseas.

American Express cites commercial sensitivity when asked what market share it hopes to gain in New Zealand. Its advertising campaign beginning on Tuesday targets 18-to-45-year-olds.

It hopes to better the response in Australia where a similar credit card was launched in late 1997.

"Card usage [overall] is up by 50 per cent in Australia," says Mr Arnold. "When we launched in 1997 we were the country's fifth-largest card issuer and we are now third, closing fast on second."

New Zealanders hold 2.2 million plastic cards, a figure that has been relatively static in recent times. Reserve Bank figures show credit card monthly spending topped $1 billion for the first time in December.

Meanwhile, American Express is to proceed with a three-for-one stock split subject to shareholder approval at the United States AGM on April 24.