KEY POINTS:
Low-interest credit cards are replacing traditional hire purchases and personal loans as a means of taking out consumer debt.
The Warehouse has been the latest to launch a low-interest card, offering a 2.99 per cent interest on purchases in its stores for the first six months.
It follows
other deals such as the Bank of New Zealand's GlobalPlus card, currently offering a six-month, 4.95 per cent interest rate on balances transferred from other cards.
ANZ is offering a fixed payment plan on its cards, whereby some customers can ring-fence a certain value of retail purchases for up to 24 months and pay 10.95 per cent interest.
As retail sales soften, banks and finance companies are competing aggressively for the consumer dollar.
Statistics issued this month by credit reporting agency Veda Advantage showed applications for hire purchases were down 52 per cent in the first quarter of 2008, and those for personal loans were down 12 per cent.
However, Veda Advantage country manager John Roberts said the slowdown in spending couldn't be blamed for all of it, as applications for credit cards were up 6 per cent in the same period.
Rather than going through the hassle of filling out hire purchase application forms, shoppers were putting purchases on their low-interest cards, he said.
"A lot of people now are seeing those cards as another form of unsecured lending. It's just a very convenient way for consumers to get access to money."
BNZ general manager of strategy and marketing, Blair Vernon, said low-interest credit cards first appeared a couple of years ago and interest rates had dropped as banks increasingly competed with retailer deals.
"The major banks are not only competing among themselves, but obviously against largely non-bank providers in that credit market."
People traditionally turned their minds to debt consolidation in the early part of the year following Christmas, and so there were many balance transfer offers available at the moment.
But Vernon did not think New Zealand would see the zero interest rate deals offered in the UK and Australia, because the global credit crisis had now made funding debt very costly.
The Warehouse Financial Services general manager Ed Hayes said it was offering the new product to cover all ends of the market.
