Let us number crunch for a hypothetical no interest credit card with a limit of $1,000 and a $10 per month fee (aka an interest payment) for non-zero balances with a $35 monthly repayment and express this as an amortised loan (to calculate the implied interest rate).
Based on the $1,000 initial debt, the implied average interest rate you may pay is approximately 21% pa charged monthly in arrears.
The implied interest rate on the monthly balance outstanding ranges between 12% pa charged monthly in arrears (on the $1,000 initial drawdown) to 480% pa charged monthly in arrears (on the end of term balance of $25). I sincerely hope that no consumer will draw or have a balance outstanding of just $25 and pay a $10 per month fee!
The number crunching gets worse for lower balances. For example, on a $500 initial debt, the implied average interest rate you may pay is approximately 42% pa charged monthly in arrears. Crickey!
Conclusion. Personally, I shall stick to the traditional 55-day interest free credit card with no annual fees, rewards, and additional cards (hint – a customer owned bank offers all these) and pay the credit card in full every month.
Seek your own advice to discover what credit card would be best for you.
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