Back in November 2016 Wesfarmers announced that it had entered into an agreement with Citi for the distribution of Coles-branded credit cards.
The 10-year agreement would see Coles continue to distribute credit cards under its own brand and, following a transition period, Citi will be the credit card issuer and manage the operations of the credit card portfolio.
The deal itself was worth around $945 million with the net proceeds to be applied to repay Wesfarmers Group debt.
Back then there was little indication about what it would mean for consumers, now that the deal has been finalised, we have a much better idea of what the change means.
While Citi has reported that “the key value proposition of each of the products has not changed”, Money’s research partner for both our Consumer Finance Awards and Best of the Best awards notes several changes that could impact cardholders.
“The products have remained relatively similar in terms of annual fees, interest rate and points earning, with the changes being largely to the ‘fine print’ items, such as how the minimum repayment is calculated and the late payment fees,” says Joshua Sale, research analyst at Canstar.
According to Canstar the five biggest changes, which took effect from March 5 include:
A reduction in interest-free days
Then: 62 interest-free days.
Now: 55 interest-free days, bringing these cards into line with the most common number of interest-free days in the market.
A change in minimum repayment
Then: The minimum monthly payment was calculated as the greater of $10 or 2.22% of the balance.
Now: The minimum monthly payment is the greater of $30, 2% of the card balance, or the sum of 1% of the card balance, late payment fee (if any) and any interest charged for that month.
Limited choice in direct debit arrangement
Then: Direct debits could be set up to pay the minimum payment due, the closing balance or fixed payment amount.
Now: Only minimum payment due or closing balance can be set as up as direct debit arrangements.
Note: Consumers who had previously set up direct debits that will no longer be available (for example fixed payment amounts) were changed to the minimum payment due option following March 5.
A change in late payment fees
Then: The late payment fee was $20 for each statement period.
Now: There will be a $10 fee if the payment due is not received by the payment due date, and a $10 fee every seven days after that until the due payment is made.
A new dishonour fee
Then: Coles previously didn’t charge a credit card dishonour fee.
Now: A dishonour fee of $15 has been introduced for each time a payment to an account is dishonoured.
More details can be found here.
Under Money’s award guidelines the Coles No Annual Fee MasterCard, which won Best Transactor Credit Card (Non-Bank) in Money’s Best of the Best Awards for 2018 will no longer be able to use the Money award logo as the number of interest-free days has reduced from 62 to 55 days.
However given no changes were made to the reward program for the Coles Reward MasterCard is entitled to use the Best Rewards Credit Card (Non-Bank) logo.
Money and Canstar are in the process of working out our 2018 winners for our Consumer Finance Awards. We will reveal the new winners in our June issue.