Low-rate Amp Card Ambushes Bank Rivals
Sydney Morning Herald
Friday June 26, 1998
AMP has flexed its financial muscle and put the heat on banking rivals with a credit card carrying a 9.95 per cent introductory rate.
Launched by AMP's new bank yesterday, it is the first time in Australia that American Express has put its brand on a bank's credit card, and Amex hopes it will boost its local performance.
After six months, the interest rate on the card reverts to 13.85 per cent, still around 1.5 percentage points lower than most credit card rates offered by major banks.
But the relationship between AMP and American Express is set to create tension within the Olympic community. Already Visa card management has rejected claims by Amex that AMP credit cards could be used to buy Olympic tickets.
While AMP is an Olympic sponsor, Amex is not. Visa has the exclusive global rights for consumer payments systems at the 2000 Games.
During the next 12 months, AMP Banking will take on traditional banks by marketing a range of products, from home loans, credit cards and deposit and cash management accounts to small business services.
Managing director of AMP Banking, Mr Stephen Balme, said eventually the one card would offer credit, debit and smart card applications.
The AMP credit card includes a rewards program of the type that during the past five years have helped boost credit card usage to record levels. Australians owe around $30 billion on bank credit cards alone.
So far credit card issuers have competed using reward schemes, rather than interest rates. But Mr Tony McCoy, from the interest rate monitoring company Market Faxts, said the low-rate AMP card could force other financial institutions to change tack.
"I think the next battle ground on interest rates is credit cards," he said. "Most of the banks were waiting for the first cab off the rank. This move by AMP might be the incident that's needed to lead the battle."
National Australia Bank spokesman Mr Haydn Park said reward programs were a better way to encourage credit cards usage. But he said the bank would now reconsider its "competitive position".
Reserve Bank statistics show that despite a 2.5 percentage point cut in official interest rates during the past two years, credit card rates have fallen by just 1.4 percentage points. That compares to a 3.05 per cent drop in home loan interest rates.
Until next year, the credit card is only available to AMP's 1.2 million shareholders. It includes up to 55 days' interest-free, no joining or annual fee for the first year and earns points towards rewards such as shopping vouchers and discounts on AMP products.
PAGE 27: AMP says `no conflict'.
© 1998 Sydney Morning Herald
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